US Dollar stabilizes as markets await critical economic data
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The US Dollar (USD) traded sideways on Wednesday morning, with the USD Index hovering slightly below 107.00. Ahead of the Thanksgiving holiday, attention shifts to key US economic releases, including the Personal Consumption Expenditures (PCE) Price Index, Durable Goods Orders, Initial Jobless Claims, and the second estimate of the Q3 GDP. These data points will provide critical insights into the Federal Reserve's policy trajectory and influence broader market sentiment.
US Dollar performance this week
The USD faced mixed fortunes this week, with its strongest gains against the Canadian Dollar (CAD) and Australian Dollar (AUD) while showing notable weakness against the Japanese Yen (JPY). JPY outperformed all major currencies, gaining 1.31% against the USD amid a shift in risk sentiment and a drop in US Treasury yields.
The USD’s subdued performance comes as risk appetite improved modestly on Tuesday, making it difficult for the Greenback to gather strength. US Treasury yields remained below 4.3%, limiting the USD’s upside potential despite a solid economic backdrop.
Key currency highlights
NZD/USD: Gains traction post-RBNZ rate cut
The Reserve Bank of New Zealand (RBNZ) lowered its policy rate by 50 basis points to 4.25%, matching market expectations. While the announcement initially caused fluctuations in NZD/USD, the pair stabilized and gained momentum, trading above 0.5850. RBNZ Governor Adrian Orr’s comments about further potential rate cuts in February added a dovish undertone to the currency.
EUR/USD: Narrow trading range
EUR/USD failed to make decisive moves on Tuesday, closing the day unchanged and continuing to trade below 1.0500 in a narrow range on Wednesday morning. The pair remains sensitive to risk sentiment and USD dynamics as the market awaits key US data.
GBP/USD: Losing traction near 1.2600
GBP/USD tested the 1.2600 level for the second consecutive day on Tuesday but lost momentum, trading sideways above 1.2550. The pair’s failure to capitalize on recent gains reflects cautious sentiment ahead of US data and potential renewed USD strength.
USD/JPY: Under pressure
USD/JPY experienced a significant drop, falling 0.7% on Tuesday and extending losses to trade below 152.00 on Wednesday morning. A decline in US Treasury yields and weak USD sentiment weighed on the pair, marking continued bearish momentum.
Gold (XAU/USD): Recovery continues
Gold rebounded from Tuesday's lows near $2,600, posting modest gains to end the day above $2,640. The metal extended its recovery early Wednesday, trading close to $2,650, supported by sliding US bond yields and a softer USD.
Outlook
Market focus now turns to a packed US economic calendar, which includes:
Personal Consumption Expenditures (PCE) Price Index: The Fed’s preferred inflation gauge will provide insights into inflationary pressures.
Durable Goods Orders: A proxy for manufacturing and industrial strength.
Initial Jobless Claims: Key labor market indicator.
Q3 GDP (Second Estimate): A revision could reshape growth expectations for the US economy. These data points, along with geopolitical developments and risk sentiment, will drive near-term currency and commodity moves.
The USD is likely to remain range-bound ahead of the data, with the potential for sharp moves depending on inflation and growth outcomes. Gold and the Japanese Yen stand out as safe-haven plays if risk appetite deteriorates, while high-beta currencies like the NZD and AUD will remain sensitive to risk sentiment and commodity price movements.
US Dollar performance this week
The USD faced mixed fortunes this week, with its strongest gains against the Canadian Dollar (CAD) and Australian Dollar (AUD) while showing notable weakness against the Japanese Yen (JPY). JPY outperformed all major currencies, gaining 1.31% against the USD amid a shift in risk sentiment and a drop in US Treasury yields.
The USD’s subdued performance comes as risk appetite improved modestly on Tuesday, making it difficult for the Greenback to gather strength. US Treasury yields remained below 4.3%, limiting the USD’s upside potential despite a solid economic backdrop.
Key currency highlights
NZD/USD: Gains traction post-RBNZ rate cut
The Reserve Bank of New Zealand (RBNZ) lowered its policy rate by 50 basis points to 4.25%, matching market expectations. While the announcement initially caused fluctuations in NZD/USD, the pair stabilized and gained momentum, trading above 0.5850. RBNZ Governor Adrian Orr’s comments about further potential rate cuts in February added a dovish undertone to the currency.
EUR/USD: Narrow trading range
EUR/USD failed to make decisive moves on Tuesday, closing the day unchanged and continuing to trade below 1.0500 in a narrow range on Wednesday morning. The pair remains sensitive to risk sentiment and USD dynamics as the market awaits key US data.
GBP/USD: Losing traction near 1.2600
GBP/USD tested the 1.2600 level for the second consecutive day on Tuesday but lost momentum, trading sideways above 1.2550. The pair’s failure to capitalize on recent gains reflects cautious sentiment ahead of US data and potential renewed USD strength.
USD/JPY: Under pressure
USD/JPY experienced a significant drop, falling 0.7% on Tuesday and extending losses to trade below 152.00 on Wednesday morning. A decline in US Treasury yields and weak USD sentiment weighed on the pair, marking continued bearish momentum.
Gold (XAU/USD): Recovery continues
Gold rebounded from Tuesday's lows near $2,600, posting modest gains to end the day above $2,640. The metal extended its recovery early Wednesday, trading close to $2,650, supported by sliding US bond yields and a softer USD.
Outlook
Market focus now turns to a packed US economic calendar, which includes:
Personal Consumption Expenditures (PCE) Price Index: The Fed’s preferred inflation gauge will provide insights into inflationary pressures.
Durable Goods Orders: A proxy for manufacturing and industrial strength.
Initial Jobless Claims: Key labor market indicator.
Q3 GDP (Second Estimate): A revision could reshape growth expectations for the US economy. These data points, along with geopolitical developments and risk sentiment, will drive near-term currency and commodity moves.
The USD is likely to remain range-bound ahead of the data, with the potential for sharp moves depending on inflation and growth outcomes. Gold and the Japanese Yen stand out as safe-haven plays if risk appetite deteriorates, while high-beta currencies like the NZD and AUD will remain sensitive to risk sentiment and commodity price movements.