The dollar falls on Monday on growing bets the Federal Reserve will freeze its multi-year rate hike cycle. Euro leads gains among greenback’s rivals.
Even after last week’s strong U.S. jobs data for December, market experts believe the world’s biggest economy is losing momentum.
FED chair’s comments have added to expectations the central bank may adopt a more cautious outlook.
Against a basket of its rivals, the greenback fell 0.25% to 95.95, close to a 2-1/2-month low hit last week.
On Friday, Powell told the American Economic Association that the Fed is not on a preset path of interest rate hikes. Further, he added that it will be sensitive to the downside risks markets are pricing in.
Money markets have priced out a U.S. rate hike this year. They are even pricing in a small probability of a rate cut in 2020. The Fed raised rates four times in 2018.
The dollar outperformed other currencies in 2018 due to the Fed being the only major central bank to hike rates. If stays on hold in 2019, other currencies such as the euro might benefit.
Financial markets are also optimistic about a meeting of U.S. officials and their counterparts in Beijing this week. This would be the first talks since U.S. and Chinese Presidents agreed on Dec. 1 to a 90-day truce in their trade war.
START TRADINGForex – Commodities – US Dollar falls ahead of shrinking rate hike expectations
Waning expectations of a rate hike boosted the euro. The single currency rose by more than a third of a percent at $1.1437.
The Australian dollar gained 0.28% to $0.7123.
Sterling rose to a one-week high on Monday as traders prepared for the British parliament to reconvene this week. The pound’s strength at the start of the week was largely down to dollar weakness.
Mixed signs on the momentum in Britain’s economy continue to be overshadowed by investors angst about the sort of Brexit. Sterling rose to as high as $1.2754, up 0.3% on the day, before settling at $1.2740. Against a broadly stronger euro the pound shed 0.3% to 89.845 pence.
Oil prices rose by 2% on Monday, extending a rally from 18-month lows hit in December. OPEC production cuts and steadying equity markets supported the increase of the oil prices.
Gold prices rose on Monday, closing in on the psychologically important $1,300 level. The dollar was dented by expectations that the U.S. Federal Reserve would halt its rate-hiking cycle for the year. This lifted demand for the metal from holders of other currencies.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.