US Dollar Slides, Traders Price in Fed Rates Cut
The US dollar fell against its major trading partners Friday ahead of the release of the Institute for Supply Management’s manufacturing reading for December. Traders have begun to price in Fed rates cut for 2025, weighing on US dollar index after initial rally.
The dollar index (DXY) was last down 0.16% on the day 109.04, after hitting a two-year high of 109.54 on Thursday. It is on track for a weekly gain of 0.94%.
Despite recent dollar gains, there remains considerable uncertainty over when policies will be introduced by the new U.S. government and what their ultimate impact will be. That could pause the dollar rally in the near term. All eyes are on the U.S. inauguration and on the details surrounding the timing and size of potential tariff hikes from the incoming Trump administration.
The euro faces a weaker growth outlook and may be hurt by U.S. tariffs, with the European Central Bank (ECB) expected to cut rates further than the Federal Reserve this year. Traders are pricing in 100 basis point rate cuts by the ECB by year end and only a less than certain chance of 50 basis point cuts by the Fed.
A quick summary of foreign exchange activity on Friday showed that USDEUR rose to 1.0303 from 1.0263 at the Thursday US close but was below a level of 1.0329 at the same time Thursday morning.
There are no Eurozone data on Friday’s schedule, but European Central Bank policy board member Philip Lane is schescheduledspeak. The next European Central Bank meeting is scheduled for Jan. 30.
GBPUSD rose to 1.2409 from 1.2380 at the Thursday US close but was below a level of 1.2452 at the same time Thursday morning. UK consumer credit and mortgage lending both rose less than expected in November, data released overnight showed. The next Bank of England meeting is scheduled for Feb. 6.
USDJPY fell to 157.2416 from 157.6163 at the Thursday US close but was above a level of 157.2246 at the same time Thursday morning. There were no Japanese data released overnight. The next Bank of Japan meeting is scheduled for Jan. 23-24.
USDCAD fell to 1.4395 from 1.4401 at the Thursday US close and 1.4418 at the same time Thursday morning. There are no Canadian data on Friday’s schedule. The next Bank of Canada meeting is scheduled for Jan. 29. #US Dollar Slides, Traders Price in Fed Rates Cut Navy Intercepts Boat Laden with 100,000 litres of Stolen Crude Oil in Ondo
