Dollar Index Faces First Weekly Decline in 2024; Eyes on US Jobs Data

The dollar index appears poised for its inaugural weekly drop of the year, influenced by diminishing Treasury yields amidst banking sector concerns. Attention now shifts to the impending release of US jobs data, anticipated to provide insights into potential rate adjustments by the Federal Reserve.

Euro and Pound Gain Ground

The euro advances by 0.1% to $1.0881, extending its previous day's 0.49% gain, while the pound sees a similar uptick of 0.1% to $1.2757 following a 0.43% surge on Thursday. Consequently, the dollar index slips by 0.1% to 102.99, hovering near a one-week low.

First Weekly Decline Since December

With a projected 0.5% decline, marking its initial weekly setback of 2024, the dollar index faces its most substantial weekly drop since mid-December. Analysts attribute this decline to dwindling investor confidence sparked by New York Community Bancorp's report on heightened risks in the commercial real estate sector.

Concerns in Regional Banks

US regional banks witness further sell-offs, amplifying losses from the prior day's revelations by New York Community Bancorp regarding increased stress in its commercial real estate assets. This heightened apprehension prompts a 10-basis-point drop in the benchmark 10-year Treasury yield on Thursday, totaling approximately 27 basis points for the week, before steadying at 3.884% on Friday.

Anticipation Surrounding US Non-Farm Payrolls

Markets await the release of the highly anticipated US non-farm payrolls report, poised to impact bond yields significantly. Federal Reserve Chair Jerome Powell's recent stance against anticipated rate cuts in March adds to the intrigue surrounding the report's potential implications on market sentiment and the dollar's trajectory.

BOJ Contemplates Policy Adjustments

The Bank of Japan's recent summary of opinions reveals deliberations over potential near-term exits from negative interest rates, signaling a potential shift in policy stance and its ramifications on Japanese bond yields.

Market Speculation on Fed Rate Cuts

Market sentiment reflects a diminishing likelihood of a Fed rate cut in March, with current pricing indicating a 37.5% probability compared to over 70% a month earlier. Similar expectations prevail for a cut in May, with market dynamics and economic data playing pivotal roles in shaping future monetary policy decisions.

Bank of England Maintains Rates

While the Bank of England maintains its rates, contributing to stability in the pound's value, the impact of this decision is overshadowed by developments in the US market.

Other Currency Movements

The Australian dollar strengthens by 0.5% to $0.6606, while the Swiss franc marginally appreciates to 0.8557 per dollar and 0.9313 per euro.

Also Read: Fed Chair Powell's Remarks Prompt Mixed Reactions in Forex Markets