Forex Dollar Holds Ground as Investors Eye US GDP and ECB Meeting

Forex Dollar resilience, ECB insights, and economic shifts. Stay informed on US GDP and ECB meeting outcomes. Expert analysis for strategic decisions."

Jan 25, 2024 - 02:42
Jan 25, 2024 - 02:42
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Forex Dollar Holds Ground as Investors Eye US GDP and ECB Meeting
Forex Dollar Holds Ground as Investors Eye US GDP and ECB Meeting

The dollar maintained stability near a six-week high, hovering at 103.35 against a basket of currencies, with attention on U.S. GDP data and the European Central Bank (ECB) meeting. As anticipation builds for clues on U.S. interest rates, the euro softened ahead of the ECB policy meeting.

Investors are closely watching the first reading of Q4 U.S. GDP, expected to show around 2% annualized growth, reflecting a slowdown from the previous quarter. Despite the dip, the report is likely to indicate the U.S. avoided a recession in 2023 and show easing inflation, setting the stage for potential rate cuts in H1 2024.

Kieran Williams, Head of Asia FX at InTouch Capital Markets, noted the dollar's dependence on market perceptions of the Fed rate path, a trend expected to persist. The dollar index, up 2% this month, reflects reduced bets on early Fed rate cuts amid resilient U.S. economic data.

Markets currently price in a 43% chance of a March cut, down from 88% a month ago. With the Fed expected to hold next week, Chair Jerome Powell's comments will be pivotal for assessing potential rate cuts.

The euro weakened slightly to $1.0877 ahead of the ECB meeting, where rates are expected to remain steady. Attention centers on officials' stance regarding expectations of significant rate cuts, with markets pricing in 130 basis points of cuts this year.

In Asia, the yuan held steady after China's central bank slashed bank reserves, injecting $140 billion to bolster the economy. The move follows a reported $278 billion rescue package for stock markets. The Australian and New Zealand dollars struggled to sustain a China-inspired rally, with the Aussie at $0.6575 and the kiwi at $0.61085.

The yen weakened to 147.77 per dollar, retracting gains from the Bank of Japan's recent hawkish comments. Bank of Japan Chief Kazuo Ueda hinted at a potential shift from ultra-loose monetary policy, citing increased prospects of achieving inflation targets.

Also Read: Forex Dollar Strengthens for Second Week as Rate Cut Bets Fade

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