Dollar in search of lifeline ahead of Christmas
2023-12-22
Summary:
Thin holiday trading weighed on the dollar. Attention shifts to US PCE data are unlikely to halt the ongoing bearish trend.
The dollar struggled amid thin trading ahead of the Christmas and New Year's Eve. Focus now turns to US PCE reading which might unlikely halt the current bear run.
A Reuters poll of strategists showed expectations for the dollar to fall against G10 currencies in 2024, with the greater part of its decline due in the second half of the year.
The IMF in Oct forecast the U.S. economy would grow by 1.5% in 2024, compared to 1.2% for the eurozone and 4.2% for China. Data showed US GDP increased at a 4.9% annualized rate last quarter, revised down from 5.2%.
The number of Americans filing new claims for unemployment benefits rose marginally last week, another sign that the economy was regaining some momentum heading into next year following upbeat retail sales and housing data.
In the eurozone, a downturn in business activity deepened in Dec, which flashed recession signals. Still the ECB pushed back against rate cut expectations, saying it prioritised inflation fight.
Euro zone inflation slowed sharply to 2.4% in November year on year, the lowest since July 2021, although many economists expect price pressures to tick up again in the coming months.
The single currency confronts resistance near the $1.1000 handle. It could remain range-bound given the upcoming holiday, pointing to a potential move towards the 200 SMA.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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