Dollar Backs Off on Thursday, the dollar retreated in European trade, pulling back from two-week highs against a basket of major rivals. This decline was driven by active profit-taking and a tapering off of US treasury yields. The market now focused on the upcoming US GDP growth data for the first quarter and unemployment claims data
which are expected to provide new insights into the likely path of US monetary policies.
The Dollar Index
The dollar index, which measures the greenback against a basket of six major currencies, fell by 0.2% to 104.90. This came after reaching its highest level since May 14 at 105.18. On Wednesday, the index closed 0.5% higher, marking its second consecutive profit and the largest daily gain since April 30
driven by a spike in US treasury yields.
US Treasury Yields
US 10-year treasury yields fell by 0.6% on Thursday, moving away from a four-week high of 4.638%. This marked the first loss in three sessions as yields tapered off ahead of a series of important US economic data releases and speeches by Federal Reserve officials.
US Rates and Market Expectations
Market expectations for US interest rate cuts remain a key focus. The odds of a 0.25% interest rate cut by the Federal Reserve in September stand at 49%
while the odds of such a cut in November are at 62%. According to the Fedwatch tool, investors are not highly optimistic about multiple rate cuts this year
with a single cut being the most likely scenario currently priced in.
US Growth Data and Unemployment Claims
Investors are eagerly awaiting crucial US economic data, including GDP growth figures for the first quarter
which expected to show a growth rate of 1.2%. Additionally, unemployment claims data is anticipated to increase slightly to 218,000 for the past week
up from 215,000 the previous week. These data points are essential for assessing the health of the US economy and the potential direction of Federal Reserve monetary policy.
Conclusion
The dollar’s retreat from its two-week high and the decline in US treasury yields highlight the market’s anticipation of key economic data releases. Investors are closely monitoring US GDP growth and unemployment claims data for insights into the future path of US monetary policy. As these figures released, they will provide critical information that could influence the dollar’s trajectory and overall market sentiment.
FAQs
Why did the dollar retreat from its two-week high? The dollar retreated due to active profit-taking and a decline in US treasury yields
as traders awaited crucial US economic data.
What is the significance of the dollar index? The dollar index measures the value of the US dollar against a basket of six major currencies
providing a comprehensive view of the dollar’s performance in the forex market.
How do US treasury yields affect the dollar? Higher US treasury yields typically strengthen the Dollar Backs Off they attract more foreign investment. Conversely, lower yields can weaken the dollar by reducing the return on dollar-denominated assets.
What are the market expectations for US interest rate cuts? Market expectations, as indicated by the Fedwatch tool
suggest a 49% chance of a 0.25% interest rate cut in September and a 62% chance in November
with limited expectations for multiple cuts this year.
Why are US GDP growth and unemployment claims data important? These data points provide key insights into the health of the US economy and influence the Federal Reserve’s monetary policy decisions
impacting market sentiment and the value of the Dollar Backs Off.