The US Dollar Is Up Slightly After GDP Data Release

(CTN News) – In a generally stable economy, the US dollar (USD) gained on Thursday after data showed that the world’s largest economy grew faster than expected in the fourth quarter.

At 103.37, the dollar index, which measures the value of the greenback against six major currencies, was up 0.1%.

On the other hand, the euro fell against the dollar as a result of mixed comments from the President of the European Central Bank, Christine Lagarde. It is too early to discuss rate cuts for the euro zone economy, but she noted that the risks to economic growth remain “tilted to the downside.”.

At its policy meeting on Thursday, the European Central Bank kept borrowing costs unchanged.
A single euro zone currency traded at $1.0863, down 0.2%.

According to the Bureau of Economic Analysis’s advance GDP estimate, gross domestic product in the United States increased at a rate of 3.3% annualized in the last quarter, compared to consensus expectations of a 2.0% increase.

It’s only fitting that a year that exceeded expectations defied expectations. Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, says the numbers don’t show weakness.

“What is there not to like?” The problem is that the Fed does not have to be in a hurry to reduce interest rates. The Fed may be able to cut later and slower rather than sooner and faster.

As of late Wednesday, the U.S. Dollar rate futures market was pricing in a roughly 47% probability of a rate cut at the March meeting, up from the 40% probability factored in late Wednesday and the 80% probability factored in two weeks ago, according to LSEG’s rate probability calculator.

It is estimated that the first rate cut will occur at the May meeting with a 91% probability.
The Federal Reserve is widely expected to hold interest rates steady next week, but Chairman Jerome Powell’s remarks will be closely scrutinized to determine whether the U.S. Dollar central bank is ready to begin cutting rates.

Investors are pricing in rate cuts of 130 basis points (bps) by the ECB in 2024, roughly in line with the level before the ECB’s statement. At the beginning of January, they were discounting 150 basis points.

In addition to GDP data, a separate report from the Labor Department indicated that initial claims for state unemployment benefits increased 25,000 to 214,000 for the week ended January 20. The latest week’s claims were expected to reach 200,000 by economists.

However, given the release of the GDP data, its impact on the market was muted.

The dollar fell 0.2% versus the yen to 147.22.
Sterling was slightly lower at $1.2717.

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