The US dollar gained against major currencies on Tuesday, December 17th, following stronger-than-anticipated retail sales figures that indicated robust underlying economic momentum. This surge comes as markets await interest rate decisions from the Federal Reserve and other central banks this week.
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November retail sales jumped 0.7%, exceeding expectations, driven by increased motor vehicle and online purchases, according to data released by the Commerce Department. This positive economic news bolstered the dollar’s appeal.
Market expectations point to a 25-basis-point interest rate cut by the Federal Reserve at the conclusion of its two-day policy meeting on Wednesday. The CME’s FedWatch tool indicates a nearly 97% probability of this rate reduction.
Dollar Performance Against Major Currencies
The dollar exhibited mixed performance against various currencies. Against the Swiss franc, it edged lower by 0.2% to 0.89270 after nearing its highest level since July. The euro, already projected to decline nearly 5% against the dollar this year, dipped 0.24% to $1.048825. Meanwhile, the US dollar index, which measures the dollar’s strength against six other currencies, climbed 0.17% to 106.97, reaching a session high of 107.08.
Market analysts are currently grappling with the question of whether the dollar’s impressive run this year is sustainable. Factors such as robust US economic performance and the perception of the dollar as a safe haven amid global uncertainties contribute to its continued strength.
Global Interest Rate Decisions and Currency Movements
The pound sterling appreciated against the dollar after data revealed stronger-than-expected UK wage growth in the three months leading up to October. The Bank of England’s rate decision is due on Thursday. Sterling strengthened 0.16% to $1.27040.
Conversely, the yen gained strength against the dollar as market expectations for a Bank of Japan rate hike this week diminished, favoring a potential move in January. The yen rose 0.42% against the greenback to 153.52 per dollar.
Elsewhere, the dollar weakened 0.06% to 7.287 against the offshore Chinese yuan amidst concerns about Chinese economic growth, pushing 10-year bond yields near record lows. The Australian dollar depreciated 0.6% versus the greenback to $0.6332. The Swedish krona and Norwegian krone also weakened against the dollar, down 0.76% and 0.56% respectively, to 10.964 and 11.2052. These currency movements come as Sweden’s Riksbank is anticipated to cut rates significantly this week, while Norges Bank is expected to maintain current rates.
Bitcoin briefly surged to $108,379.28, approaching the $110,000 mark, before settling with a 0.68% gain at $106,798.26.
Market Outlook
Some analysts suggest that market apprehension regarding the potential for only two rate cuts by the Federal Reserve next year is contributing to the dollar’s positive momentum. The interplay of global economic data, central bank decisions, and market sentiment will continue to shape currency markets in the coming days. The dollar’s resilience underscores its ongoing appeal as a safe haven asset in a complex and dynamic global economic landscape.
