King dollar holds strong as markets brace for US inflation data
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The US Dollar retains its dominant position as global markets prepare for the highly anticipated US inflation report. Investors continue to react to the robust US labor market data from Friday, coupled with expectations of rising inflation under President-elect Donald Trump’s administration.
What’s driving the US dollar strength?
The recent Nonfarm Payrolls (NFP) report revealed that the US economy added 256,000 jobs in December, far exceeding the forecasted 160,000. Moreover, the Unemployment Rate unexpectedly dropped to 4.1%, fueling speculation of a tighter labor market. Following these numbers, the Federal Reserve is expected to maintain its cautious approach to interest rate cuts, with markets pricing in only one cut for 2025, likely in June.
The Federal Reserve's hawkish stance, combined with anticipated inflationary policies under Trump’s leadership, has sent US Treasury bond yields soaring. The 10-year Treasury yield is approaching the critical 5% mark, adding to the Greenback’s appeal.
Key developments across major currency pairs
The British Pound struggles: GBP/USD trades near 1.2126, its weakest in 14 months, weighed down by UK bond market instability and fears of a Bank of England-Federal Reserve policy divergence.
Euro faces pressure: EUR/USD remains subdued around 1.0200, impacted by dovish remarks from European Central Bank officials suggesting further easing measures.
Australian Dollar sinks: AUD/USD hovers near four-year lows at 0.6131, struggling to capitalize on China’s record trade surplus and efforts to stabilize the Yuan.
Japanese Yen gains marginally: USD/JPY retreats below 157.50 as risk-off sentiment and hopes of a Bank of Japan rate hike offer some support.
Canadian Dollar holds steady: USD/CAD trades near 1.4450, with rising oil prices limiting the pair’s upside. WTI crude is near $77.50, buoyed by colder weather and US sanctions on Russian oil.
Gold price rakes a breather
Gold prices pause their four-day rally, trading just below $2,700. With traders eyeing profit-taking opportunities ahead of the US Consumer Price Index (CPI) data release, the precious metal remains a popular safe-haven choice amidst ongoing market uncertainty.
Looking ahead
All eyes are on the US CPI report later this week, which is expected to set the tone for Federal Reserve policy discussions and global market sentiment. With inflationary pressures anticipated to rise, the US Dollar is likely to maintain its upward trajectory, keeping other currencies under pressure.
What’s driving the US dollar strength?
The recent Nonfarm Payrolls (NFP) report revealed that the US economy added 256,000 jobs in December, far exceeding the forecasted 160,000. Moreover, the Unemployment Rate unexpectedly dropped to 4.1%, fueling speculation of a tighter labor market. Following these numbers, the Federal Reserve is expected to maintain its cautious approach to interest rate cuts, with markets pricing in only one cut for 2025, likely in June.
The Federal Reserve's hawkish stance, combined with anticipated inflationary policies under Trump’s leadership, has sent US Treasury bond yields soaring. The 10-year Treasury yield is approaching the critical 5% mark, adding to the Greenback’s appeal.
Key developments across major currency pairs
The British Pound struggles: GBP/USD trades near 1.2126, its weakest in 14 months, weighed down by UK bond market instability and fears of a Bank of England-Federal Reserve policy divergence.
Euro faces pressure: EUR/USD remains subdued around 1.0200, impacted by dovish remarks from European Central Bank officials suggesting further easing measures.
Australian Dollar sinks: AUD/USD hovers near four-year lows at 0.6131, struggling to capitalize on China’s record trade surplus and efforts to stabilize the Yuan.
Japanese Yen gains marginally: USD/JPY retreats below 157.50 as risk-off sentiment and hopes of a Bank of Japan rate hike offer some support.
Canadian Dollar holds steady: USD/CAD trades near 1.4450, with rising oil prices limiting the pair’s upside. WTI crude is near $77.50, buoyed by colder weather and US sanctions on Russian oil.
Gold price rakes a breather
Gold prices pause their four-day rally, trading just below $2,700. With traders eyeing profit-taking opportunities ahead of the US Consumer Price Index (CPI) data release, the precious metal remains a popular safe-haven choice amidst ongoing market uncertainty.
Looking ahead
All eyes are on the US CPI report later this week, which is expected to set the tone for Federal Reserve policy discussions and global market sentiment. With inflationary pressures anticipated to rise, the US Dollar is likely to maintain its upward trajectory, keeping other currencies under pressure.