Currency Movements After Fed’s Interest Rate Hold
Markets are responding to the Federal Reserve’s decision to hold interest rates steady. Chair Jerome Powell signaled no immediate intention to cut rates, strengthening the U.S. dollar while pressuring risk assets and currency markets.
Attention now turns to Q4 GDP figures from both the Eurozone and the United States. Germany’s economy is projected to shrink by 0.1%, reinforcing concerns about stagnation across the eurozone. Meanwhile, U.S. GDP growth is expected to slow to 2.6%, down from 3.1% in Q3. Investors will also analyze Core PCE, forecast at 2.5%, for further insight into inflation and the Fed’s next policy moves.
Key Data Out Today
- Eurozone: Germany’s Q4 GDP (Quarter-over-Quarter) is expected at -0.1%, following a 0.1% expansion in the previous quarter, while the Year-over-Year figure is projected at 0% after a -0.3% decline. These figures will offer insight into the eurozone’s economic performance amid recession concerns.
- United States: At 13:30, key economic indicators include:
- Core Personal Consumption Expenditures (QoQ, Q4): Expected to rise to 2.5% from 2.2%, an important measure of inflation closely watched by the Fed.
- Q4 GDP (Annualized): Forecast at 2.6%, down from 3.1%.
- Initial Jobless Claims (Jan 24): Expected at 220K, compared to 223K in the previous reading.
- U.S. Housing Data: At 15:00, Pending Home Sales (MoM, Dec) will be released, previously at 2.2%, indicating the health of the housing market.
Commodities
- Crude Oil: WTI crude is trading at $72.73 per barrel, up 0.16% for the day, while Brent crude is at $76.59 per barrel, a slight increase of 0.01%. Prices remain subdued due to concerns over global demand and potential impacts from U.S. trade policies.
- Metals: Gold has edged up by 0.06% to $2,761.80 per troy ounce, maintaining its appeal as a safe-haven asset. Silver has decreased by 0.13%, trading at $30.83 per troy ounce.
Currency Movements
EUR/USD
- EUR/USD: The euro is relatively stable against the U.S. dollar, trading at 1.04188, a slight decrease of 0.03%. The Federal Reserve’s firm stance on interest rates has provided support for the dollar.
GBP/USD
- GBP/USD: The British pound has dipped by 0.08% to 1.24397. Investors are assessing the UK’s economic outlook amid recent policy announcements.
AUD/USD
- AUD/USD: The Australian dollar has declined by 0.18% to 0.62189. The National Australia Bank’s forecast of an interest rate cut by the Reserve Bank of Australia has contributed to this movement.
NZD/USD
- NZD/USD: The New Zealand dollar is down 0.19% at 0.56436, reflecting broader market trends and a stronger U.S. dollar.
USD/JPY
- USD/USD/JPY: The U.S. dollar has decreased by 0.44% against the Japanese yen, trading at 154.567. Investors are seeking safe-haven assets amid global uncertainties.
USD/CNY
- USD/CNY: The Chinese yuan is relatively stable, with the pair down 0.02% at 7.26565. China’s recent economic data has shown signs of stabilization.
USD/CHF
- USD/CHF: The Swiss franc is slightly stronger against the U.S. dollar, with the pair down 0.07% at 0.90652, reflecting cautious market sentiment.
USD/CAD
- USD/CAD: The Canadian dollar has weakened slightly, with USD/CAD up 0.04% at 1.44248, influenced by fluctuations in oil prices.
USD/MXN
- USD/MXN: The Mexican peso has strengthened, with USD/MXN down 0.16% at 20.4826, as emerging market currencies show resilience.
USD/INR
- USD/INR: The Indian rupee is relatively stable, with USD/INR down 0.04% at 86.5680. However, the rupee faces ongoing pressure due to the Federal Reserve’s stance on interest rates.
Market Outlook
The Federal Reserve’s decision to maintain interest rates, coupled with indications of a cautious approach to future policy changes, has reinforced the U.S. dollar’s strength. This development exerts pressure on commodities and various currencies. Investors are closely monitoring corporate earnings reports and potential U.S. trade policies, particularly proposed tariffs on Canadian and Mexican goods, which could further influence market dynamics. In this environment, market participants are advised to exercise caution and remain attentive to policy developments and economic indicators.