The dollar widened its losses on Wednesday as traders increased bets on the Federal Reserve’s new year interest rate cuts after government officials sounded optimistic about fighting inflation.
But stocks were mixed following another weak performance on Wall Street, with focus on the release of the central bank’s preferred price index scheduled for this week.
A series of indicators in recent weeks suggest the U.S. job market is softening and the economy is slowing, but not fast enough to cause major concerns about a recession.
This has prompted investors to return to risk assets, but recent activity has been restrained by profit-taking ahead of the much-anticipated Santa Rally.
According to Bloomberg News, data shows that traders are currently betting that the Fed will cut rates in June, but are pricing in an 80% chance of a rate cut in May.
Bill Ackman, the billionaire investor and founder of Pershing Square Capital Management, said that could happen as early as the first quarter.
His comments came amid an upbeat tone from Fed Chairman Christopher Waller, a typically hawkish member of the Fed, in a speech on Tuesday.
“I’m increasingly convinced that policy is now well-positioned to slow the economy and bring inflation back to 2%,” he said at the American Enterprise Institute in Washington, referring to the central bank’s goals. Ta.
“I’m encouraged by what we’ve learned over the past few weeks. Something seems to be giving us, and that’s the pace of the economy.”
– “A well-timed pivot” –
His counterpart, Michelle Bowman, said she would support further rate hikes if data suggested it was needed, but that the assessment was much more conditional than before.
More dovish comments, along with lower yields and interest rate expectations, weighed on the dollar, widening losses on Wednesday.
Against the yen, it was at its lowest level since September, and against the euro and pound, it was at its lowest level in about four months.
It also fell against most other denominations, including the Korean won, Australian dollar, and South African rand.
IG Australia’s Tony Sycamore said: “The Fed’s latest dovish comments open the door to a rate cut in 2024, reflecting the cautiousness of Fed officials in early October, which we noted as the beginning of a turning point.” This is a follow-up to his comments.”
“In my 30 years in markets, I have never seen a central bank so close to making a timely policy shift during a period of soft inflation and labor market data. Never.”
Still, some analysts say Fed officials have hinted that rising Treasury yields could serve as a proxy for further rate hikes, making it easier to pause rate hikes, but lower yields could provide support. He pointed out that they were being robbed.
Stocks struggled for traction ahead of this week’s release of a key indicator, personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Hong Kong’s sell-off in big tech companies led the decline, but Tokyo, Shanghai, Seoul, Bangkok and Manila also fell.
Sydney, Singapore, Taipei, Mumbai, Bangkok, and Jakarta rose slightly. Wellington was flat.
London’s prices fell due to the decline, Frankfurt’s prices rose, and Paris’s prices remained unchanged.
Data showed U.S. consumer confidence rose more than expected this month, even as separate reports noted strong sales over the five-day shopping weekend that included Black Friday. It was a soft performance after another outstanding day in the city.
– Main figures around 0810 GMT –
Tokyo – Nikkei Stock Average: 0.3% lower at 33,321.22 (closing price)
Hong Kong Hang Seng Index: 2.1% lower at 16,993.44 (closing price)
Shanghai – Overall: down 0.6% to 3,021.69 (close price)
London – FTSE 100: down 0.3% to 7,433.23
Dollar/JPY: down to 147.10 yen from 147.50 yen on Tuesday
EUR/USD: increased from $1.0994 to $1.1098
GBP/USD: up from $1.2698 to $1.2704
EUR/GBP: down from 86.56p to 86.53p
West Texas Intermediate: up 0.1% to $76.47 per barrel
Brent crude oil: down 0.1% to $81.64 per barrel
New York – Dow: up 0.2% to 35,416.98 (close)
Dan/Sko