Dollar up to eight-week high as traders weigh Fed path
The dollar is up to an eight-week high as traders reconsider when the Federal Reserve is likely to cut interest rates.
It is after Fed chair Jerome Powell gave a press conference on Wednesday and said that it would not be appropriate to cut rates until there was greater confidence that inflation is moving to 2%. After the Fed press conference, the target rate probability of a rate cut in March fell to 35.5%. The probability fell further after Friday's job report, which revealed that the US economy created 333,000 jobs in January. Expectations were for 180,000 job creations. IGTV’s Angela Barnes has this round-up.
The US dollar
The USD has recently gotten stronger because of the Federal Reserve's plans with interest rates. Jerome Powell, the chairman of the Federal Reserve, announced that they won't be cutting rates until they see more signs of inflation going up. This made it less likely that rates will be lowered in March, which caused the market to react. Additionally, there was a positive job report in the US, with 333,000 jobs being created in January. This was higher than expected and kept the unemployment rate steady at 3.7%, instead of rising to 3.8% as predicted. Powell's recent interview made it even more unlikely that rates will be cut in the near future.
The Bank of Japan
Looking at the charts, it's clear that the US dollar has been dominating recently and the euro hasn't been doing so well. There are concerns about the euro's overall economic situation. However, the US dollar has seen a small increase when compared to the Japanese yen. This is because the Bank of Japan has hinted at reducing stimulus and bringing short-term rates out of negative territory.
Gold
In terms of gold, its price has gone down slightly by 0.51%. However, it's still above the $2,000 mark. This decrease is due to the reduced expectations of the Federal Reserve taking aggressive easing actions. The US dollar has also played a part in lowering the value of gold.
Overall, it seems like the US dollar is getting stronger, and this trend could continue. The expectation of the Federal Reserve keeping rates higher for a longer period might increase US Treasury bond yields and make the US dollar even stronger.
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