USA Dollar

BUZZ-COMMENT-US recap: Dollar dented as Fed clings to three rate cuts in 2024

March 20 (Reuters)The dollar index exchanged early gains for losses on Wednesday as short-term Treasury yields fell after the Fed steered clear of reducing the number of rate cuts in its 2024 dot plots, even as it increased GDP and inflation projections.

Fed Chair Jerome Powell’s comments highlighted gradual progress being made toward the bank’s inflation goals, and the need to see more data and remain nimble at all policy meetings. And also that the Fed will be very careful not to repeat QT mistakes.

As expected, the Fed held rates steady.

Though it kept the median dot plot at three 2024 rate cuts, the number of policymakers making that projection diminished to 10 rather from 11 members previously. Two-year Treasury yields were trading down 8bp and the probability of a June rate cut rose from 60% before the announcement to 70.5% last, though total 2024 rate cuts remained priced by 75bp.

The median expectation for 2024 y/y GDP growth was lifted from 1.4% to 2.1%, and the core PCE y/y expectation rose from 2.4% to 2.6%.

EUR/USD rose 0.45%, more than erasing losses from earlier in the day. The pair found good demand for a second day by the 200-day moving average and kijun line props.

USD/JPY shed Wednesday’s pre-Fed rise to 151.82, just shy of 2023/22’s 32-year peaks at 151.92/94, with prices briefly below Tuesday’s post-BoJ meeting high by 151 before rebounding.

Sterling’s intraday reversal for a 0.5% gain began at 1.2681 following big drops in UK inflation rates for February.

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(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. The views expressed are his own.)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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