US Dollar Strengthens Drastically Awaiting Important Economic Data Releases: Investors Beware!

Bisnis | Ekonomi - Posted on 30 October 2024 Reading time 5 minutes

DIGIVESTASI - The U.S. dollar remained steady at a high level on Tuesday, ahead of the release of key economic data this week, while the Japanese yen hovered near its three-month low amid political uncertainty.

 

As of 5:32 PM WIB, the Dollar Index, which measures the greenback against six major currencies, stood at 104.31, marking a monthly gain of 3.6%, its best performance in over two years.

 

Key Data to Be Released
The dollar has been buoyed by various economic data pointing to the strong fundamentals of the U.S. economy, fueling investor expectations that interest rate hikes by the Federal Reserve might be slower than previously anticipated. However, market participants are holding off on taking new positions as the week will be marked by important data releases.

 

The U.S. JOLTS job openings data for September is set to be released at the end of Tuesday's trading session, followed by U.S. GDP data on Wednesday. The market’s main focus is the U.S. core personal consumption expenditures (PCE) price index for September, due Thursday, as well as the monthly jobs report on Friday.

 

Another factor supporting the dollar is the belief that Republican candidate Donald Trump will win the U.S. presidential election next week. Trump's policies on tariffs, taxes, and immigration are viewed as inflationary, which could positively impact the dollar.

 

German Consumer Sentiment Strengthens
In Europe, the EUR/USD edged up 0.1% to 1.0817, boosted by a better-than-expected rise in Germany’s GfK consumer sentiment index, which increased to -18.3 points from -21.0 the previous month. Nevertheless, Germany’s economy still faces challenges, with the German Chamber of Commerce and Industry (DIHK) predicting a contraction of 0.2% this year, revising its previous forecast of stagnation from May.

 

The DIHK also forecasts zero growth in 2025, which would mark the third consecutive year without real GDP growth.

The European Central Bank (ECB) has cut interest rates three times this year, each by 25 basis points, and expectations are growing that a larger cut may be considered at the next meeting.

 

The GBP/USD rose 0.1% to 1.2982, with the British pound stable ahead of Wednesday's budget announcement, the first under the new Labour government. Meanwhile, the UK’s annual shop price deflation rate dropped to 0.8% in the 12 months to October, a larger decrease than the 0.6% drop in the previous month.

 

BRC chief executive Helen Dickinson welcomed the downward inflation trend but warned that geopolitical tensions, the impact of climate change on food supplies, and government regulation costs could influence this decrease.

 

Political Uncertainty in Japan
The USD/JPY increased 0.1% to 153.38, still below Monday's low, marking the yen’s weakest point since July, following Japan’s national election on Sunday. The election results have worsened Japan's political uncertainty, potentially complicating the Bank of Japan’s (BOJ) ability to raise interest rates further. The BOJ is expected to maintain its interest rates at Thursday's meeting.

 

Japan’s Finance Minister, Katsunobu Kato, reaffirmed that authorities would remain vigilant regarding exchange rate fluctuations, particularly those driven by speculators.

 

Meanwhile, the USD/CNY rose 0.2% to 7.1376, hitting its highest level in more than two months, ahead of China's Purchasing Managers' Index (PMI) data release on Thursday. The data is expected to provide insights into the impact of the stimulus measures announced by Beijing last month.


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Source: investing.com

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