Dollar Heading for Biggest Weekly Rise Since May Before Jobs Report

The dollar is on the rise with its best week since May. Discover how job market data and rate cut speculations shape the currency's outlook.

Jan 5, 2024 - 08:05
Jan 5, 2024 - 08:05
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Dollar Heading for Biggest Weekly Rise Since May Before Jobs Report
Dollar Heading for Biggest Weekly Rise Since May Before Jobs Report

The dollar is set for its largest weekly gain since May as traders think the U.S. might not lower interest rates soon.

The strong dollar is making the euro weaker, even though inflation in Europe is not as high, and the European Central Bank may not need to lower rates.

The dollar's strength will be tested when the jobs report comes out. Experts expect around 170,000 new jobs in December, less than in November.

In December, the Federal Reserve predicted a 0.75% rate cut in 2024. But since the start of the year, the expectations have dropped, and now traders think there might be less than a 1.4% cut this year.

Moh Siong Sim, a money expert, said recent data shows that the U.S. job market is still strong. The jobs data will be essential to see if the Fed will keep rates lower than what people expect.

The dollar got support from data showing that private U.S. companies hired more workers than expected in December.

The dollar's value against other currencies went up by 0.25%, and for the week, it's up by 1.3%, the most since May.

On the other hand, the euro is weaker, down by 0.24%, and for the week, it dropped by 1.09%, the most since early December.

Inflation in Europe rose to 2.9% in December from 2.4% in November, close to what experts expected.

Investors and policymakers don't agree on how many times rates will be cut this year. Traders think the ECB will cut rates six times this year, maybe starting in March or April. Policymakers think it might take until mid-2024 to be sure about controlling inflation.

The yen got weaker too, going down by 0.37% to 145.14 per dollar. The earthquake in Japan adds more doubts about a policy change by the Bank of Japan.

Also Read: US Dollar Faces Decline After Federal Reserve Meeting: Mixed Signals on Interest Rates and Global Market Trends

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