HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
Exness information and reviews
Exness
86%

Dollar rallies as market scales back Fed rate cut bets


17 January 2024

Raffi Boyadjian   Written by Raffi Boyadjian

The US dollar rose sharply against all its major counterparts on Tuesday, extending its gains today, as Fed Governor Waller said that while inflation is within “striking distance” of their 2% objective, they should not rush into cutting interest rates until it is clear that low inflation is sustained. Waller was the first Fed policymaker to officially talk about the possibility of rate reductions and thus, the fact that he is pushing against imminent rate reductions prompted investors to eventually pay attention. If he doesn’t want to cut in March, maybe no one else does. That’s why the probability for a March rate cut dropped to around 65% from slightly more than 70%, while the total number of basis points worth of rate cuts by December was reduced from around 160 to 150.

Traders scale back Fed rate cut bets, US retail sales on tap

Still, this suggests that there is ample room for further adjustment and what could pour more cold water on investors’ aggressive rate cut bets may be today’s US retail sales for December. Following the hotter-than-expected CPI numbers for the month, improving consumer demand may translate, not only into healthier economic growth, but into concerns about stickier inflation in the months to come. This could thereby prompt investors to further lift their implied rate path, which could in turn help the dollar extend its recovery.

Later in the day, dollar traders will get the Beige Book, which provides details on the current economic conditions in each of the US’s 12 Federal districts, and they may closely listen to what New York Fed President John Williams has to say.

Sterling licks its wounds as CPI data beats estimates

The pound suffered against the dollar yesterday after data showed that UK wages slowed in the three months to November. That said, the currency entered a recovery mode today as the CPI figures for December came in hotter-than-expected, confirming the upside risks suggested by the services PMI for the month. With headline inflation being double the BoE’s 2% objective and the core rate holding at 5.1%, the probability for a May rate cut dropped from 90% to 55% as the actual figures contrasted the forecasts by some institutions, including Deutsche Bank, that UK inflation will fall below 2% by April.

Expectations that the BoE will begin its own rate-reduction process after the Fed does may help pound/dollar recover some of the recently lost ground, but the pound will be put to another test this week as UK retail sales for December are coming out on Friday.

Yen falls the most, ECB officials send conflicting messages

The yen was among the main losers yesterday as reduced Fed rate cut bets and increasing expectations that the BoJ is in no rush to take interest rates out of negative territory are resulting in widening yield differentials between the US and Japan. The euro traded on the back foot as Portuguese central bank chief Centeno and his French counterpart appeared open to the idea of rate reductions, with the latter policymaker noting that they may need to start cutting this year. Those remarks come after German central bank chief Nagel and ECB board member Schnabel said that it is too early to enter such a discussion. 

ECB President Lagarde also sounded skeptical today about the aggressive market pricing, but that did not stop her from paving the way for a possible cut in the summer, adding to the mixed signals. She is scheduled to speak later in the afternoon as well.

On Wall Street, all three of its main indices closed in the red, with the Dow Jones losing the most. The repricing of market expectations regarding the Fed’s future course of action appears to be the main drag for equities and improving retail sales later today may result in further losses. China’s lower than expected GDP earlier today may also be denting sentiment, evident by the retreat in stock futures.

by XM.com

#source


RELATED

Fed cut expected, market reaction hinges on multiple factors

Fed meeting today; rate decision at 18:00 GMT, Powell speaks 30 minutes later; A 25bps cut is expected but details matter for markets, particularly the dot plot; Powell expected to follow the Jackson Hole script; all eyes on possible signals about October.

17 Sep 2025

Dollar drops as Fed rate cut looms

US dollar and Treasury yields drop ahead of Fed decision. President Trump urges Powell to deliver bigger cut. Pound up after jobs data, yen gains on BoJ hike bets. S&P 500, Nasdaq and gold hit new record highs.

16 Sep 2025

Risk sentiment on the mend as investors gear up for Fed decision

A defining week has just started, with investors counting down to Wednesday’s pivotal Fed meeting.

15 Sep 2025

Risk appetite improves but investors stay vigilant

Dollar and US equities rally; crypto market is indecisive; Volatility remains elevated despite improved risk sentiment; US PPI data could show tariff impact ahead of CPI report; Gold and oil are supported by broader geopolitical tensions.

10 Sep 2025

Fragile risk appetite as US data boost Fed cut bets

Softer US jobs data leave door open for a larger Fed rate cut; Dollar and US equities try to find their footing today; Yen under pressure after PM Ishiba’s resignation; Gold and oil rally, supported by weaker dollar and geopolitical tensions.

8 Sep 2025

Risk appetite firms up as investors anticipate softer US data

Risk sentiment improves, dollar slightly under pressure; Gold holds gains, bond yields ease across the board; Today’s NFP could determine the size of the Fed rate cut; Decent market reaction if jobs data delivers a strong upside surprise.

5 Sep 2025

Risk markets jittery as expectations for soft US data mount

Risk sentiment remains fragile ahead of the first batch of key US data; Gold and rising bond yields continue to unnerve investors; ADP report and ISM Services PMI might open the door to a 50bps Fed cut; Fedspeak to intensify, markets to digest Miran’s hearing headlines today;

4 Sep 2025

Calm before the storm in markets ahead of pivotal US data

Dollar on the back foot, equities remain wobbly; Court battles in focus after Friday’s tariffs ruling; Investors prepare for critical US data; all eyes on Friday’s jobs report; Uncertainty boosts gold and silver.

1 Sep 2025

Dollar extends slide as Bessent talks double rate cut

Dollar slips on increasing Fed rate cut bets. Treasury Sec. Bessent favors a 50bps reduction. Yen rallies on concerns about BoJ’s inflation metric. S&P 500, Nasdaq and Bitcoin climb to new record highs.

14 Aug 2025

Dollar slips as CPI data increase September Fed cut bets

US headline CPI holds steady, but core CPI accelerates; Still, the miss in the headline rate increases September cut bets; Gold slightly up, but traders remain cautious ahead of Trump-Putin talks

13 Aug 2025

Markets on edge, await US inflation figures

Muted risk appetite ahead of critical US inflation report; Strong CPI report could derail Fed rate cut expectations, boost the dollar; Gold and oil hold steady as Trump-Putin meeting nears; Aussie ignores RBA cut.

12 Aug 2025

Tariff and Fed developments weigh on dollar’s recovery

Muted risk appetite; equity indices edge higher, bitcoin struggles; August 12 deadline for US-China truce in the spotlight; Gold flirts with $3,400 as US prepares to tariff gold bar imports.

8 Aug 2025

Dollar suffers from Trump’s tariff announcements

Tariffs back in the spotlight; China could be next; Equities shrug off tariff headlines but dollar weakens; Gold rises despite progress made in the US-Russia talks; BoE to cut rates; pound’s performance hinges on degree of dovishness.

7 Aug 2025

Dollar seeks direction as Trump’s TV appearance could hurt risk appetite

Following a disastrous Friday for dollar assets, both the US dollar and US equity indices are showing tentative signs of life.

5 Aug 2025

US jobs data may challenge the dollar’s recent strength

Despite the eventful calendar so far this week – with the FOMC meeting and the various tech stock earnings standing out – market volatility had remained low until yesterday.

1 Aug 2025

Dollar rally pauses as Fed signals patience once again

Both the US dollar and US equity indices are trying to find their footing after the critical FOMC meeting.

31 Jul 2025

Dollar strength persists ahead of key events

Both the dollar and US equities start the week on a strong note; Euro suffers as European leaders challenge the US-EU trade deal; Gold retreat stalls; oil fails to materially benefit from Trump's Russia comments.

29 Jul 2025

Dollar on the defensive, seeks support

ECB pauses, raises the bar for September rate cut; Trump’s Fed visit proves uneventful, despite rate cut demand; Dollar losses mount this week, even the yen outperforms the greenback; Cryptos are on the back foot today; altcoins maintain sizeable gains.

25 Jul 2025

EU and US close to a trade deal ahead of ECB decision

After Japan, the US is nearing a trade accord with the EU. S&P Global PMIs in focus ahead of next week’s FOMC decision. ECB to stand pat, Lagarde’s signals to be key for the euro. S&P 500 hits a new record high, but earnings results come in mixed.

24 Jul 2025

Dollar strength undermined by Trump's Fed criticism

Trump firmly holds the keys to market volatility; A July rate cut is likely written off unless data turns negative; US Treasury yields have taken notice of Trump’s criticism of Powell; Pound benefits from euro’s troubles despite mixed UK data.

17 Jul 2025


Editors' Picks

How to Choose the Best Forex Advisor 2025

Key Factors to Consider When Choosing a Forex Advisor. Risk Management. Fees and Costs. Compatibility with Your Trading Style.

Automating Success: The Benefits and Risks of Using Forex Expert Advisors

This article explores the benefits and risks associated with using Forex Expert Advisors, providing insights into how traders can maximize their potential while mitigating potential downsides.

Best Forex Brokers 2025

By prioritizing factors such as overall rating, regulatory compliance, trading conditions and platform reliability traders can make an informed decision that aligns with their trading needs and aspirations, setting the stage for a potentially prosperous trading journey.

The Top Forex Expert Advisors 2024: Performance, Strategy, and Reliability Review

An annual roundup reviewing the most successful Forex Expert Advisors (EAs) based on their performance, strategies employed, reliability, and user feedback. This piece would provide insights into which EAs have been market leaders and why.

The Evolution of Forex Expert Advisors: Navigating the Path of Technological Revolution

The concept of automated trading has been around for decades, but the accessibility and sophistication of Forex EAs have seen significant advancements in the past few years. Initially, automated trading systems were rudimentary, focusing on simple indicators like moving averages.

Best Forex EAs – Forex Expert Advisors Rating

Expert Advisors (EAs) Rating features high-quality Free and paid Forex EA most popular on the market today.

FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Just2Trade information and reviews
Just2Trade
76%
FXNovus information and reviews
FXNovus
75%
Riverquode information and reviews
Riverquode
75%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.