Summary
- Canadian dollar steadies near 1-month low as yields ease.
- 10-Year Treasury yield rises to above 4.15%.
- U.S. dollar steadies after four-day rally; yen, Aussie outperform.
- Swiss franc lower for a sixth day after SNB’s Jordan comments on its recent gains.
- U.S. weekly jobless claims at lowest level since September 2022 at 187,000 last week; estimate: 205,000.
- Euro currency stabilizes below $1.09 after U.S. retail sales beat, Fed rate-cut timeline questioned.
- U.S. January Philadelphia Federal Reserve factory index at -10.6, estimate -6.5.
- U.K. pound sterling extends rally after CPI rises unexpectedly; Sunak wins vote on immigration.
- Japanese yen drops to six-week low.
- U.S. housing starts and permits both beat estimates.
- China’s yuan drops to two-month low amid growth concern; China’s population drops for second consecutive year.
- EIA: Crude -2,492 Bbl, median estimate -850,000 Bbl.
Noteworthy
- Dollar Rises to Highest in a Month on Fed Rate Cut Timeline
The U.S. dollar attained its highest levels of 2024 on a broad index basis, however, was mostly rangebound below $1.09 against its most widely watched peer, the euro currency. Broad range-trading versus the U.K. pound sterling was also largely the case around $1.27.
However, the U.S. dollar rose sharply this week versus the Japanese yen while rising to a six-week high. Similarly, albeit to a lesser degree, the U.S. dollar rose against the Canadian dollar, Australian and New Zealand dollars as well as the Swiss franc which suffered to its lowest level in six sessions.
Numerous factors were probably fueling the dollar’s rise, including falling stocks in Asia, conflict in the Red Sea and tensions between Taipei and Beijing after elections in Taiwan. In addition, strikes from Iran and the Houthis are continuing to unsettle world markets.
Analysts have also pointed to policy makers pushing back against talk of near-term interest rate cuts by the Federal Reserve. Although market participants still anticipate rate cuts in 2024, the timing and magnitude are in question with the recent uptick in interest rates.
The CME FedWatch tool has also signaled fading confidence in short-term rate cuts by the U.S. Federal Reserve.
Recent market pricing suggested a 29% chance rates would be the same in March as they are now. One week ago, investors assigned only a 19% probability that interest rates wouldn’t be cut at either the Federal Reserve’s January or March meetings.
Today’s weekly jobless claims fell to their lowest level since September 2022, a potential further indication interest rates may remain higher on the sticky side.
Yesterday’s stronger-than-expected U.S. retail sales data also exerted upward pressure on interest rates which has continued into today. After touching a low late last year of below 3.85%, the currently 10-year Treasury yield is currently exceeding 4.15% as of this writing.
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