As expectations for an impending rate hike grow, the yen rises and the GBP falls

On Monday, the yen gained ground against the dollar as indications that the Bank of Japan will remove negative interest rates during its policy meeting the following week diverged from forecasts that the Federal Reserve will lower rates in June. The dollar index, which compares the dollar value to that of the yen and five other strong competitors, remained near the nearly two-month low it hit on Friday as the U.S. labor market appeared to be cooling, supporting the Fed’s decision to loosen policy.

Amidst speculation that the Bank of England may drop interest rates more slowly than the Federal Reserve or the European Central Bank, the pound fell precipitously from a multi-month high reached during its best week since November 2022. On the other hand, the CME Group’s FedWatch Tool shows that traders have set odds of 73% for the Fed to lower rates by the end of its June 11–12 meeting. This is because Friday’s jobs data softness supported the Fed Chair’s earlier comments this week that the Fed was “not far” from having the confidence necessary to lower rates.

The Fed will meet again on March 19–20. After ending Friday with a more than 1% gain to $1.2811, a level not seen since late July, sterling fell 0.7% to $1.2859. The currency ended a six-session winning streak versus the dollar last week with a 2.35% increase. The euro barely moved from its Friday high of $1.0980, its highest level since January 12. It was trading at $1.0944.

Last Thursday, the ECB kept interest rates at record highs while carefully setting the stage for a reduction later in the year. Within the cryptocurrency space, bitcoin was down 0.17% at $68,301, staying below Friday’s record high of $70,175 as of this writing. Reverting to the five-week low of 146.48 yen touched on Friday, the dollar fell 0.17% to 146.82 yen. Standing just above Friday’s low of 102.33, the dollar index was unchanged at 102.68.

Leave a Reply

Your email address will not be published. Required fields are marked *