Dollar Maintains Steady Position Near Six-Week Peak, Eyes on ECB and BoE Policies
On Thursday, the dollar maintained a steady position, close to a six-week peak, as investors waited for key economic data, including the first reading of the US Gross Domestic Product (GDP) for the fourth quarter which is expected to reveal a 2% annualized growth. Recent data showed powerful US business activity in January, with expansions in both services and manufacturing sectors.
Attention is also focused on the European Central Bank (ECB), with markets predicting it will maintain its current high interest rates at its January meeting. ECB President Lagarde hinted at a potential rate cut during the summer of 2024, highlighting a data-dependent approach. The market currently estimates a 60% likelihood of an initial rate reduction as soon as April.
The Bank of England (BoE) is expected to maintain current rates on February 1 and begin reducing rates in August. This anticipation follows a significant drop in inflation, which peaked at 11.1% in October 2022, the highest in 40 years. The Pound Sterling initially gained support from positive Purchasing Managers Index (PMI) data from the UK but lost momentum following strong PMI results from the US.
In Japan, the Bank of Japan (BoJ) acknowledged the alignment of conditions for phasing out stimulus and negative interest rates. The head of Japan's largest business lobby, Keidanren, advocated for wage increases above the inflation rate, suggesting a shift in the BoJ's monetary policy. Despite geopolitical tensions and global economic uncertainty, the Japanese Yen (JPY) is expected to avoid significant losses.
The Yuan remained stable after an announcement by China's central bank on Wednesday. The bank made a significant cut to bank reserves that will add approximately $140 billion of cash into the banking system. This move is a strong indication of support for the economy, which is currently fragile.
Gold prices lingered near a one-week low, affected by the stronger US dollar and higher bond yields after the US reported strong business activity. Investors are expecting further US GDP data and the ECB's policy meeting outcomes. Gold reached its lowest point in nearly a week following data indicating a strong start to the US economy in 2024.
Lastly, oil prices increased after reports showed a greater-than-expected decline in US crude stockpiles. Additionally, the Chinese central bank's reduction of banks' reserve ratios supported hopes for further stimulus measures and economic recovery.
On Thursday, the dollar maintained a steady position, close to a six-week peak, as investors waited for key economic data, including the first reading of the US Gross Domestic Product (GDP) for the fourth quarter which is expected to reveal a 2% annualized growth. Recent data showed powerful US business activity in January, with expansions in both services and manufacturing sectors.
Attention is also focused on the European Central Bank (ECB), with markets predicting it will maintain its current high interest rates at its January meeting. ECB President Lagarde hinted at a potential rate cut during the summer of 2024, highlighting a data-dependent approach. The market currently estimates a 60% likelihood of an initial rate reduction as soon as April.
The Bank of England (BoE) is expected to maintain current rates on February 1 and begin reducing rates in August. This anticipation follows a significant drop in inflation, which peaked at 11.1% in October 2022, the highest in 40 years. The Pound Sterling initially gained support from positive Purchasing Managers Index (PMI) data from the UK but lost momentum following strong PMI results from the US.
In Japan, the Bank of Japan (BoJ) acknowledged the alignment of conditions for phasing out stimulus and negative interest rates. The head of Japan's largest business lobby, Keidanren, advocated for wage increases above the inflation rate, suggesting a shift in the BoJ's monetary policy. Despite geopolitical tensions and global economic uncertainty, the Japanese Yen (JPY) is expected to avoid significant losses.
The Yuan remained stable after an announcement by China's central bank on Wednesday. The bank made a significant cut to bank reserves that will add approximately $140 billion of cash into the banking system. This move is a strong indication of support for the economy, which is currently fragile.
Gold prices lingered near a one-week low, affected by the stronger US dollar and higher bond yields after the US reported strong business activity. Investors are expecting further US GDP data and the ECB's policy meeting outcomes. Gold reached its lowest point in nearly a week following data indicating a strong start to the US economy in 2024.
Lastly, oil prices increased after reports showed a greater-than-expected decline in US crude stockpiles. Additionally, the Chinese central bank's reduction of banks' reserve ratios supported hopes for further stimulus measures and economic recovery.