Dollar Remains Strong

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Dollar Remains Strong

Dollar Remains Strong At 3-Month High As Rate Cut Bets Fade

The US Dollar appears to be firm & strong as it prints near 3-month highs during Tuesdays session. The USD is supported by solid T-yields and increased odds of a less aggressive rate cuts campaign this year.

For now, the US Dollar Index (DXY) is trading at 104.42, while it reached 104.60 a day earlier. Overall, the last high of DXY on Monday was one of the highest points seen in November 2023.

For 2024, the DXY has gained 3%, while the performance for 2023 was -2%. Thats why we can say that the DXY is off to a good start as the Fed remains firm on its interest rate stance.

day earlier, the data showed an uptick in the US services sector for January. As per the details, employment in the industry rebounded with an increase in new orders.

The data shows that the services sector has started the year on a solid footing.

Experts believe that the recent batch of economic data from the USA has diminished any hopes of an aggressive rate cut campaign by the Fed. After all, even the Fed chair has rejected the idea of a rapid rate cut campaign.

Since then, the odds of early rate cuts from March or April continue to dwindle. According to the FedWatch tool, the odds are now only 15%, while they were as high as 69% at the start of 2024.

For 2024, around 115 bps (1.15%) rate cuts are forecasted. In the previous month, the investors were looking forward to 150 bps (1.5%) rate cuts this year.

According to OCBCs currency strategist, the tightness in the labour market appears to be easing down slowly. In addition, the US is facing a disinflation trend, and it is here to stay for quite some time.

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