US dollar (USD) Market Update
The US dollar (USD) continues to strengthen as market participants scaled back their expectations for the number of interest rate cuts by the Federal Reserve, leading to a positive close last week. Despite a decline in US Treasury yields, the USD maintained its momentum fueled by a robust January jobs report, which indicated significant growth in payrolls, wages, and a decrease in unemployment. This blowout data has delayed potential rate cuts, with market analysts now looking towards a rate reduction in June rather than March. ING forecasts no rate cut in March unless there is a return of financial system stress, but they maintain their prediction of rate cuts in May, with a total of 150 basis points this year and an additional 100 basis points in 2025.
Recent key price data for major USD currency pairs shows the USD to EUR at near 30-day highs, the USD to GBP slightly above its 3-month average, and the USD to JPY also above its 3-month average. The stability in trading ranges for these pairs points to a market view that the USD may continue its current upward trend against major currencies, especially with the strong economic performance in the US and the delay in rate cut expectations. The upcoming US data releases, such as the Consumer Price Index (CPI) and Retail Sales, along with the Federal Reserve's interest rate decision on March 20th, will likely provide further guidance to market participants on the future direction of the USD exchange rates.