The dollar rose against a basket of currencies as the market awaits economic data releases this week for insight into the Fed’s next move, XS.com said.
“It seems that the main driver for [the dollar for] 2024 is whether the markets will continue to price in Federal [Reserve] interest rate cuts or if the Fed has lost control and made a policy mistake.”
Entering 2024, the dollar’s weakness reflects mixed sentiments in the markets, balancing between expected shifts in Fed policy and global economic developments, XS.com added.
The inversion of the Treasury yield curve and the weakness of the dollar have likely gone too far in the near term, although this week’s data releases are unlikely to prompt a reversal of this trend yet, Danske Bank Research said.
For now, the market will probably look for confirmation of the disinflationary trend to justify an inverted money-market curve and the weaker dollar, it said.
Treasury bill supply hitting the market from the end of January could prove the trigger for a reversal in front-end rates and EUR/USD.