US Dollar consolidates losses, eyes on central bank speakers

Pressured by the improving market mood and dovish Fed bets, the US Dollar continued to weaken against its major rivals at the beginning of the week. The US Dollar Index touched its lowest level in seven months at 102.94 but managed to stage a modest rebound early Tuesday. Bank of Japan (BoJ) Governor Haruhiko Kuroda, Bank of Canada (BoC) Governor Tiff Macklem and FOMC Chairman Jerome Powell will be speaking at the International Symposium on Central Bank Independence organized by Riksbank. The US economic docket will also feature the NFIB Business Optimism Index for December and the IBD/TIPP Economic Optimism Index for January.

According to the CME Group FedWatch Tool, markets are currently pricing in a nearly 80% probability of a 25 basis points Fed rate hike in February. Although some policymakers pushed back against this market positioning, the US Dollar struggled to stay resilient against its rivals on Monday. Atlanta Fed President Raphael Bostic reiterated that the Fed was willing to keep rates higher well into 2024 and San Francisco Fed President Mary Daly told the Wall Street Journal that a case could be made for either a 50 or a 25 bps rate hike at the next meeting.

Nevertheless, markets seem to have turned cautious with US stock index futures losing between 0.2% and 0.25% in the early European morning. Meanwhile, the benchmark 10-year US Treasury bond yield stays relatively calm, slightly above 3.5% following Monday’s slide.

EUR/USD climbed to its strongest level since early June above 1.0760 on Monday before going into a consolidation phase below 1.0750 early Tuesday.

GBP/USD managed to build on Friday’s gains and rose nearly 100 pips before closing slightly below 1.2200 on Monday. The pair was last seen trading modestly lower on the day at around 1.2170.

USD/JPY failed to make a decisive move in either direction on Monday and closed the day virtually unchanged. As of writing, the pair was moving sideways slightly below 132.00.

Gold price advanced above $1,880 for the first time since early May on Monday but erased a large portion of its daily gains to close modestly higher. In the early European morning, XAU/USD is moving up and down in a narrow channel at around $1,870.

Bitcoin registered small gains on Monday and was last seen moving sideways near $17,200. Ethereum gained more than 2% on Monday and touched its highest level in nearly four weeks near $1,350 before retreating toward $1,300 on Tuesday.

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