Dollar stands firm on hopes of economic ‘soft landing’

16 Nov 2023

The US Dollar stood firm on Thursday following two days of declines and a subsequent rebound as economic data indicated the Fed will wait longer before slashing interest rates.

The greenback rose to $1.08395 against the Euro and $1.2395 against the Pound, but was predominantly trading flat at 151.33 Yen following a recovery on Wednesday from its sharpest drops against major rivals in a year.

The Dollar index – measuring the greenback against key peers – gained 0.14% to 104.47. The index rose 0.31% on Wednesday following a fall of 1.51% the day before, Reuters news agency reports.

USD received support from better-than-forecast retail sales, as well as increasing signals of cooling inflation, fuelling speculation of an economic ‘soft landing’ allowing the Federal Reserve more time before reducing rates.

“While inflation is falling, the economy remains robust, which might even allow the Fed to increase rates if they chose,” stated senior corporate FX dealer at Convera, James Kniveton, adding that Fed officials don’t currently appear to have an appetite for a rate hike.

Traders remain sure rates will not move any higher, but have reduced the odds for an initial cut by March to under 1-in-4 from 1-in-3 the day before, as per the CME Group's FedWatch Tool.

However, Legal and General Investment Management’s APAC investment strategist, Ben Bennett was slightly more cautious in regard to the outlook.

“It's a narrow path to a soft landing, and this is just one step on that path. We could very easily get more data in the coming weeks that suggests the Fed needs to hike again, or indeed that growth is rolling over and a recession is more likely,” he stated.
Elsewhere, India’s Rupee was weaker on Thursday, trading at 83.2125 against the greenback at the time of writing, compared to 83.1425 at the close of the previous session.
Furthermore, the Australian Dollar fell 0.45% to $0.6480, whilst the New Zealand Dollar edged down 0.62% to $0.59855.