The US Dollar Firms Amidst Positive Economic Indicators and Central Bank Cautiousness

18 January 2024 - 266 views

The US dollar is poised for a second consecutive weekly gain on the back of positive economic indicators and cautious central bank policy. Weekly gains for the Australian and New Zealand dollars are expected to be the highest since November and June respectively, while the dollar is up almost 5% against the Japanese yen this year. The yen’s weakness comes as the Bank of Japan’s plans to raise rates have been thrown into doubt. Meanwhile, the euro and sterling have declined against the dollar, and retail sales in the US have exceeded expectations. Overall, central banks’ hesitant stance towards rate cuts and positive economic data have supported the US dollar.

[Inflationary Scenario]
[Significance: Medium]

1. The dollar is set to achieve a second consecutive weekly gain due to positive signs in the U.S. economy and cautious attitudes toward rate cuts from central banks.
2. The Australian dollar and New Zealand dollar are expected to experience their largest weekly gains since November and June respectively.
3. The dollar has risen by almost 5% against the Japanese yen this year amid uncertainty over rate hikes by the Bank of Japan.
4. Japan’s core inflation has slowed to its lowest level since June 2022, which supports the wait-and-see approach of policymakers.
5. The strength of the U.S. labor market and better-than-expected retail sales have influenced market rate-cut expectations and put pressure on traders’ wagers.