Euro and Pound Climb as U.S. Dollar Hits Five-Month Low
GBP
The GBP/USD pair has surged to a four-month high, gaining 0.1% and currently trading at 1.2800 (interbank). Reduced inflationary pressures in the U.S. economy and dovish Federal Reserve comments have propelled this currency pair.
GBP/EUR is presently at 1.1505 (interbank).
The Bank of England (BoE) recently maintained interest rates for the third consecutive meeting, keeping borrowing costs at 5.25% for the foreseeable future. BoE policymakers have stated that it's premature to discuss rate cuts, although investors anticipate multiple rate cuts next year, with the first expected in May.
No significant events today
EUR
EUR/USD is currently trading at 1.1120 (interbank). The currency pair has continued to climb and reached a fresh five-month high of 1.1140 (interbank) earlier.
This trend is influenced by the expected dovish stance of the U.S. Federal Reserve regarding interest rates. Conversely, the ECB has tried to temper expectations of interest rate cuts.
ECB President Christine Lagarde mentioned that rate cuts were not discussed at the December meeting, where the central bank maintained the cash rate at 4.0% for the second time in a row. She also highlighted how persistent inflation pressures and robust wage growth might delay interest rate cuts.
No significant events today
USD
The U.S. Dollar Index, measuring the dollar against six major currencies, has hit a five-month low near 100.60. The index is set to decline by 2.6% this year, breaking a two-year streak of strong gains, as investors bet on Federal Reserve rate cuts starting in March 2024.
Additionally, the yield on the U.S. 10-year Treasury note has fallen to 3.82%, marking a new five-month low. Yields on the longer-term 30-year Treasuries have dropped below 4% for the first time since late July.
Investors are increasingly speculating that the Federal Reserve will need to implement a more aggressive rate-cutting cycle, with many expecting rate cuts to begin as early as March.
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Later today, U.S. Initial Weekly Jobless Claims, Trade Balance, and November Pending Home Sales, which are anticipated to have increased in November, could offer some support to the dollar.
Today’s Events (GMT):
13:30 - Initial Jobless Claims - Forecast: 210K
15:00 - Pending Home Sales (Nov) - Forecast: 1.0%
CAD
USD/CAD has found support and is currently trading at 1.3222 (interbank) in the morning session. The currency pair has rebounded following a sharp decline in oil prices due to increased inventories last week and the resumption of oil shipments through the Red Sea route.
In addition to the resumption of oil shipments through the Red Sea, higher oil stockpiles have exerted downward pressure on oil prices. The United States Energy Information Administration (EIA) reported a 1.8 million barrel increase in crude inventories on Wednesday. It's important to note that Canada is a leading oil exporter to the United States, and lower oil prices weigh on the Canadian Dollar.
The BoC mentioned in a recent meeting that another rate hike is not ruled out. However, markets believe the likelihood of another rate hike has decreased, and investors widely anticipate that the next move by the BoC will be an interest rate cut sometime next year.
No significant events today
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