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The US dollar is about to complete the fourth consecutive month of increase (provisional balance +0.90%) on expectations of a postponement of the rate cut by the Fed. Friday’s PCE price index data, the inflation indicator preferred by the Fed, were “warmer” than expected for March.
This week’s attention is now focused on the Fed meeting, which concludes on Wednesday.
The US central bank will likely confirm a cautious and gradual approach to changing interest rates in 2024.
Futures markets put the chances of a cut at 3%, according to the CME FedWatch Tool.
The FOMC has maintained its federal funds rate target at a range of 5.25% to 5.50% from July 2023.
In recent public statements, several committee members said they needed more evidence that inflation was falling toward the 2% annual target. Until then, the Fed will most likely remain in “wait and see” mode. The job market is resilient, the economy is growing, so the Fed is in no hurry.
According to Jake Schurmeier, a portfolio manager at Harbor Capital Advisors, the arrival of the moment will be well signaled with a change of tone in the statement: “in March, the message from the FOMC was ‘there will be some bumps in the road.’ When Powell last spoke on April 16th he acknowledged the reality and basically said that inflation has not made the progress that was expected.”
The Fed meeting comes ahead of Friday’s monthly jobs report, which will give a new picture of the strength of the U.S. labor market. Economists expect the economy to have added 243,000 jobs in April, moderating from 303,000 in March, while the unemployment rate is expected to remain stable at 3.8%.
The Dollar gained +3% against the Euro during 2024 following different macroeconomic dynamics.
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Technical Analysis. The euro-dollar has been moving sideways for about a year, within the wide 1.05/1.1279 range. In recent weeks he has returned to…
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