U.S. new home sales fall more than expected in October * U.S. rate futures price in 23% chance of rate cut in March * ECB’s Lagarde says too early to declare victory on inflation (adds new comment, updates prices) * Dollar index on track for worst monthly loss in a year * Dollar set for biggest monthly fall versus yen since February Composed by Gertrude Chavez-Dreyfuss Nov. 27, New York (Reuters) – The anticipation that the Federal Reserve has finished raising interest rates and may begin lowering them by the first half of next year caused the U.S. dollar to decline on Monday, setting off what is expected to be its worst monthly decline in history.
its lowest level of achievement since November 2022. From a technical standpoint, the previous two weeks have seen enough damage to the dollar index to seriously imply a breakdown. Thus, the dollar’s peak has passed, and a softer currency is now anticipated, according to Amo Sahota, director of the San Francisco-based FX consultancy company Klarity FX. “But in this case, caution is required. The Fed will intervene if you become overly bullish about the weaker dollar forecast mainly because you believe that interest rates in the US will be lowered.” According to the CME Group’s FedWatch Tool, U.S. rate futures on Monday indicated a roughly 23% likelihood that the Fed may start relaxing monetary policy as early as March. In May, that likelihood increases to almost 50%.
This week’s schedule includes an OPEC+ meeting that has been postponed, the publication of the personal consumption expenditures price index, the Fed’s preferred measure of inflation, and consumer price data from Australia and the euro zone. The Reserve Bank of New Zealand’s rate decision as well as statistics from China’s purchasing managers’ index (PMI) are also being watched by the market. The euro was up 0.2% vs the dollar at $1.0953 in other currencies. The euro has increased by almost 3.6% so far this month, on track to see its biggest monthly increase in a year. In response to ECB President Christine Lagarde’s statement that wage growth is still robust but that inflation pressures in the euro zone are lessening, the single currency of Europe exhibited minimal movement.
The US dollar has dropped by almost 2% in November, marking the worst monthly decline since February. After statistics revealed that U.S. new home sales declined more than anticipated in October, falling 5.6% to a seasonally adjusted annual pace of 679,000 units, the dollar continued its decline. The previously announced sales rate for September was lowered down from 759,000 units to 719,000 units. “I don’t see much potential for a turnaround until later this week when Q3 GDP (gross domestic product) numbers are released on Wednesday morning,” FX trader Helen Given of Monex USA in Washington stated. “We might see a reversal and some dollar strength to come if the U.S. economy can demonstrate sustained growth instead of a sudden sharp downturn as some major economists have predicted.”
Amidst this, statistics revealed that British firms surprisingly recorded a small recovery to growth in November after three months of decline. This led to the pound strengthening to a two-month high of $1.2664. At $1.2628, the pound was up 0.2% as of late. Prior to the RBNZ interest rate announcement on Wednesday, the New Zealand currency was up 0.3% at US$0.61, while the Australian dollar reached a three-month high of US$0.6614 versus the US dollar. It is anticipated that the RBNZ will maintain its current official cash rate of 5.5%. After five straight sessions of gains, the official midpoint caused the yuan to weaken in China. The onshore yuan last traded at 7.1528 per dollar. Its offshore equivalent dropped 0.1% to $7.160 for every dollar.