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The U.S. dollar slipped from a two-month high against major currencies after weak labor market data bolstered expectations for quicker Federal Reserve rate cuts. Despite this, the dollar is set for a second consecutive weekly gain following strong payrolls figures last week that dampened bets on a half-point rate cut.
On Thursday, a rise in initial jobless claims was offset by an increase in the consumer price index (CPI), indicating the need for potential monetary tightening to control Inflation. Market expectations of a quarter-point Fed rate cut on Nov. 7 rose to 83.3%, up from 80.3% the day before.
The dollar index, which tracks the currency against six peers, remained flat at 102.89 but was down 0.28% from its recent high of 103.17. Despite this, the index is on course for a 0.41% weekly gain.
Fed officials’ comments on Thursday revealed a divergence in views, with some anticipating significant rate cuts while others are open to maintaining current rates. The dollar strengthened slightly against the yen, reaching 148.64 yen, while the euro eased to $1.0934 and sterling declined to $1.3050.
The Australian dollar held steady at $0.67395, impacted by fluctuating stimulus expectations in China. Meanwhile, the New Zealand dollar rose to $0.6101 after a recent slump following the Central bank‘s rate cut announcement.
Overall, the dollar’s momentum remains upward, but fluctuations in Fed easing expectations are likely depending on incoming economic data. The currency market is expected to remain volatile in the coming months as economic indicators become more uncertain.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.