Will the U.S. dollar regain strength as expectations of a U.S. rate cut fade?

Will the U.S. dollar regain strength as expectations of a U.S. rate cut fade?

04.01.2024

In the U.S. currency market yesterday, the minutes of the FOMC meeting released yesterday indicated that the policy rate is nearing the peak of the tightening cycle, while also stating the intention that “a restrictive stance remains appropriate for the time being until a sustained slowdown in inflation becomes clear.” This served to rein in financial markets’ excessive pricing in of rate cuts.In response, the euro fell against the dollar from 1.0964 to 1.0892, marking its fourth consecutive day of decline.

The euro rose against the pound following the release of Germany’s December employment statistics yesterday, which showed that the unemployment rate remained unchanged from the previous month at 5.9% and the number of unemployed fell from 22,000 to 5,000.The EUR/AUD pair rose from 1.6153 to 1.6274, rebounding from the 20-period moving average (MA) on the 4-hour chart. Since the 75-period MA is acting as a support level on the weekly chart, we will be watching to see if the rebound continues on a time-based perspective.

Today’s schedule includes the French Consumer Price Index at 4:45 PM, Hong Kong Retail Sales at 5:30 PM, the French Manufacturing/Services PMI at 5:50 PM, the German Manufacturing/Services PMI at 5:55 PM, the Eurozone Manufacturing/Services PMI at 6:00 PM, UK Consumer Credit and UK Money Supply at 6:30 PM,UK Manufacturing/Services PMI, at 9:30 PM: US Challenger Layoffs, at 10:00 PM: German CPI, at 10:15 PM: US ADP Employment Report, at 10:30 PM: US Initial Jobless Claims, at 11:45 PM: US PMI, and at 1:00 AM: US Weekly Crude Oil Inventories.We will need to carefully assess whether the US dollar will regain strength as expectations of a US rate cut fade.