Movements of the US dollar against currencies this week
The US dollar rose during the Asian trading period on Friday, and the dollar index is currently trading at 109 levels, but it has been on a decline since the beginning of the week and is on the verge of achieving its first weekly decline in seven weeks, as it was subjected to selling pressure this week.
What are the main reasons for the decline of the US dollar this week ?
- The sudden drop in core inflation in the United States to strengthen bets on further interest rate cuts by the Fed this year.
- Fed member Christopher Waller noted yesterday, that it is still possible to make 3 or 4 interest rate cuts if the economic data continues to weaken.
- US retail sales data for December came in below expectations, although they still point to strong consumer spending.
Markets are now pricing in 41 basis points of total easing by the Fed this year, up from 27 basis points at the beginning of this month.
USDJPY
The pair is now trading near the levels of 155.50 yen, and the decline of the US dollar against the Japanese yen was the most pronounced decline this week for the dollar, driven by growing speculation that the Bank of Japan may raise interest rates next week.
GBPUSD
The British pound against the US dollar has now fallen to 1.2180, as the pair is preparing for the third weekly decline in a row, and British retail sales this morning fell to -0.3% after expectations indicated a rise from 0.1% to 0.4%.
An interest rate cut by the Bank of England at the beginning of next month seems to be the best option now, as traders estimate the odds of this at about 81%, with interest rates being cut by about 68 basis points in total for this year.
USDCNH
The Chinese yuan is still trading near its lowest levels in 16 months, and the yuan's decline came due to the strong dollar since the US election and Trump's victory, threats of US tariffs and falling Chinese bond yields.
AUDUSD & NZDUSD
The Australian dollar and the New Zealand dollar fell on Friday, but they are on their way to achieving their first weekly gain, after 7 weeks of declines.
But the pair did not move away from the lows achieved last week.
