The dollarโs strength continues to dominate currency markets, approaching its highest levels in more than two years as investors reassess Federal Reserve rate cut expectations. Following strong jobs data, markets have significantly scaled back predictions for monetary easing in 2024, now anticipating only 28 basis points of cuts compared to the Fedโs December projection of 50 basis points. The euro, while slightly up at $1.0257, has already lost over 6% in 2024 due to monetary policy divergence between the Fed and ECB. The currency marketโs attention is split between upcoming U.S. inflation data (PPI and CPI) and the potential impact of Trumpโs economic policies, particularly regarding tariffs. Meanwhile, other major currencies face their own challenges: the British pound continues its decline amid fiscal concerns, the yen weakens ahead of a crucial Bank of Japan meeting, and Chinaโs yuan faces persistent depreciation pressure despite central bank support measures. UBS Global Wealth Management predicts the dollarโs strength may persist through the first half of 2025 before potentially reversing.
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