Dollar gains on Yen and Euro at the start of 2024

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The dollar climbed on the first trading day of the year as attention turned to U.S. jobs data and European inflation numbers this week, which may provide hints on central banks' subsequent actions, while bitcoin rebounded.
The dollar climbed on the first trading day of the year as attention turned to U.S. jobs data and European inflation numbers this week, which may provide hints on central banks' subsequent actions, while bitcoin rebounded.

The dollar climbed on the first trading day of the year as attention turned to U.S. jobs data and European inflation numbers this week, which may provide hints on central banks’ subsequent actions, while bitcoin rebounded.

Dollar’s Performance and Market Sentiment:

The dollar index, gauging the USD against six currencies, closed at 101.55, marking a 0.17% increase. 

However, it faced a 2% decline in 2023, breaking a two-year winning streak as investors contemplated the potential for rate cuts by the Fed.

Euro and Yen Reactions:

The euro experienced a 0.17% dip against the dollar after data revealed ongoing contraction in euro zone factory activity for the 18th consecutive month. Meanwhile, the Japanese yen struggled, with the dollar climbing by 0.43% to 141.4 yen.

Market Anticipation and Policy Expectations:

This week is poised for significant economic data releases, including European inflation figures and U.S. data on job openings and non-farm payrolls. These updates will shape market forecasts regarding monetary policy decisions by both the Fed and the European Central Bank.

Rate Cut Speculations and Fed Insights:

Market forecasts currently indicate an 86% probability of Fed interest rate cuts, potentially commencing from March, with an expected easing of over 150 basis points throughout the year. 

The upcoming release of December’s Fed meeting minutes on Thursday is anticipated to provide further clarity on the central bank’s strategies.

Market Outlook and Impact on Commodities:

Positive sentiment from the end of 2023 is carrying over, influencing commodity and stock markets, which is extending into currency markets. 

This upbeat mood is reflected in the Australian dollar’s gains by 0.22%, the slight firmness of the Norwegian crown, and the strength of the Mexican peso among emerging markets.

Global Developments Beyond Markets:

In Japan, rescue teams faced challenges reaching areas affected by a powerful New Year’s Day earthquake, with reports of almost 50 casualties and significant infrastructure damage. 

In the currency space, the sterling held at $1.2724, exhibiting stability despite having recorded a robust 5% gain in 2023, though a repeat performance seems unlikely given economic weaknesses and political uncertainties.

Gary Monroe

Gary Monroe is a seasoned contributor to the Los Angeles Business Magazine, where he offers insightful analysis on local business trends and economic developments. With a focus on Los Angeles' dynamic commercial landscape, Gary's articles provide valuable perspectives for entrepreneurs and business professionals in the city.

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