The US dollar held steady on Thursday, supported by climbing Treasury yields and the Federal Reserve’s hawkish stance, which suggests a slower pace of rate cuts in 2025. The Dollar Index remained near its two-year high of 108.920, buoyed by robust economic data that underscored labor market resilience. However, trading activity was subdued as US markets observed a holiday for the state funeral of former President Jimmy Carter. Analysts noted that upcoming jobs data and Fed commentary could further shape market expectations regarding monetary policy.
In Europe, the euro struggled against the dollar, with EUR/USD declining by 0.1% amid Germany’s economic challenges. Despite modest gains in German exports and industrial production for November, analysts warned these improvements might not offset the broader economic slowdown. The European Central Bank is anticipated to cut rates by 100 basis points in 2025, adding pressure to the euro, which risks nearing parity with the dollar. Meanwhile, the British pound dropped 0.5% to 1.2296, reflecting concerns about the UK bond market and diminishing confidence in sterling’s performance.
In Asia, the Chinese yuan weakened to its lowest levels in 17 years against the dollar, following weak inflation and persistent producer price deflation in December. This trend signals potential for further economic stimulus from Beijing. Conversely, the Japanese yen gained strength, supported by better-than-expected wage growth, which raised hopes for inflation stability and possible interest rate hikes from the Bank of Japan. These mixed global economic signals highlight varying regional responses to inflationary pressures and monetary policies.
