The U.S. dollar saw a minor decline on Friday morning, trading at 99.095 on the Dollar Index—a gauge against six major currencies—down 0.1% at 04:05 ET (09:05 GMT). Despite this slight dip, the currency is positioned for a weekly increase of 0.2%, marking its third consecutive week of gains.
This uptick in the dollar's valuation correlates strongly with recent positive economic reports from the United States. Of particular note, initial jobless claims fell unexpectedly to 198,000 last week, significantly below the anticipated 215,000. This data point underscores ongoing resilience within the American labor market.
Market participants have responded to these economic signals by revising their outlook on Federal Reserve policy. The likelihood of imminent interest rate reductions has diminished, with traders now largely anticipating the first rate cut to occur in the mid-year period rather than earlier.
Analysts from ING characterized the dollar's ascent as a broad macroeconomic trend. Their notes highlight firmer U.S. economic indicators, such as retail sales and employment data, complemented by the Federal Reserve's Beige Book report, which portrayed a slowly expanding economy and a stable job market.
Further comments from Federal Reserve officials reinforced this moderately cautious tone overnight. Chicago Fed President Austan Goolsbee emphasized the importance of focusing on reducing inflation given the stability of the labor market. Similarly, Kansas City Fed President Jeff Schmid described inflation as "too hot," while San Francisco Fed President Mary Daly noted encouraging trends in incoming economic statistics.
Turning to currency markets overseas, the euro (EUR/USD) edged upward to 1.1613 following the release of German consumer price figures. These prices remained flat in December and recorded an annual increase of just 1.8%, which is beneath the European Central Bank's 2.0% medium-term inflation objective. The ECB has maintained its policy rates since June and recently indicated no urgency in adjusting rates again, citing strong economic growth and easing inflation concerns.
ING analysts anticipate that, with a quiet European economic calendar ahead, EUR/USD might drift lower toward 1.1555–1.1565 without significant volatility.
GBP/USD saw a modest rise of 0.1% reaching 1.3392.
In Asia, the Japanese yen strengthened slightly against the dollar, with USD/JPY declining by 0.3% to 158.19. This rebound from 18-month lows follows verbal interventions by Japanese officials concerned about the yen's rapid depreciation. Finance Minister Satsuki Katayama indicated that Tokyo might consider all options, including coordinated intervention with U.S. authorities, to address the currency’s weakness.
ING noted that volatility is expected to remain high for USD/JPY over the coming month. Despite this, one-month implied volatility for the currency pair is not considered particularly expensive at approximately 8.5%.
Other currency moves included a 0.1% rise for USD/CNY to 6.9681, a 0.1% gain for AUD/USD to 0.6704, and a 0.3% increase for NZD/USD to 0.5760.