New York Money Market Situation: The dollar strengthened after investors lowered their expectations for a Fed cut in interest rates in March.
InfoQuest – The US dollar rose against major currencies in trading on the New York Forex Exchange on Tuesday (January 16), supported by investors lowering their expectations that US Federal Reserve banks will start cutting interest rates in March. The dollar also strengthened after US government bond yields rebounded above 4%.
The dollar index, which measures the dollar's movement against six major currencies, rose 0.74% to 103.357.
The yield on 10-year US government bonds rebounded 0.11% to 4.064% after Christopher Waller, a member of the Federal Reserve Board of Governors, said that the Federal Reserve is likely to cut interest rates this year but the cuts will be cautious and not as quickly as the market expects.
“In the last cycle of rate cuts the Fed acted quickly and cut rates a lot, but this time I see no reason for the Fed to cut rates as quickly as it did in the past. I believe that as long as inflation does not rebound and remains at a high level, The Fed will be able to lower its interest rate target this year.“But it will be done methodically and carefully,” Waller said.
This was after Mr Waller's comments. Investors lowered their expectations that the Federal Reserve will start cutting interest rates in March. CME Group's latest FedWatch tool indicates investors are giving a 63.3% weight to the Fed cutting interest rates by 0.25% to 5.00-5.25% at the March 19-20 meeting after previously giving weight.
Moreover, investors gave a 35.1% weighting to the Fed keeping interest rates at 5.25-5.50% at its meeting on March 19-20, after previously giving it just 19.0%.
Regarding the economic data released last night. The Federal Reserve Bank of New York said that the Empire State Index fell to -43.7 in January, the lowest level since May 2020. And lower than analysts' expectations of -4.0 from -14.5 in December, with the index remaining below 0, indicating a contraction in the manufacturing sector. in New York.
Investors are waiting to see US economic data this week. Today, December retail sales and December industrial production will be revealed. and the January Housing Market Index from the National Association of Home Builders (NAHB).
On Thursday, the number of weekly unemployment claims will be revealed. Home construction numbers begin in December and on Friday, the January Consumer Confidence Index will be released from the University of Michigan. and used home sales in December
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