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Dollar Strong, Sterling Stumbles: Weekly Market Update

14 hours ago
14 hours ago


The US dollar is on the rise this Friday, poised to have its best week in a month. Traders are adjusting their expectations for aggressive US policy easing next year, contributing to the dollar’s strength. Meanwhile, weak growth data is putting pressure on sterling. Let’s break down the latest market movements and what it means for investors.

Dollar in Demand

  • The Dollar Index, which measures the greenback against a basket of major currencies, is up by 0.1% to 106.780.
  • The stronger than expected US figure is fuelling concerns about inflation next year due to President Trump’s trade and tax policies.
  • While other central banks are cutting rates, the Fed is taking a more cautious approach to easing in 2025.
  • Analysts at ING note that the dollar is holding onto gains due to wide rate spreads and pressure on trading partners’ currencies.

    Sterling Falls after GDP Disappointment

  • In Europe, the euro rose slightly to 1.0473 after the ECB’s rate cut.
  • The ECB hinted at more rate cuts in the new year, causing the euro to weaken.
  • Sterling dropped by 0.3% to 1.2633 after disappointing GDP data showed a contraction in the UK economy.
  • Economic activity in the UK remains subdued, with the GDP growing at a slower rate than expected.

    BOJ Meeting in Focus

  • The Japanese yen rose by 0.3% to 7.2878, near a two-year high, after China’s Central Economic Work Conference.
  • The yen gained 0.6% to 153.50 amid reports suggesting the BOJ will keep interest rates unchanged next week.

    In conclusion, the US dollar is gaining strength as traders adjust their expectations for future policy easing. Meanwhile, weak economic data is putting pressure on sterling and the euro. Investors should keep an eye on central bank meetings and economic indicators for further market movements.

    This comprehensive analysis breaks down the impact of market movements on major currencies and economies, providing valuable insights for investors. It highlights the importance of staying informed about global economic trends to make informed investment decisions.

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