US Dollar trades flat, Fed officials hint at fewer rate cuts in 2024

NEW YORK (February 7) The US Dollar Index (DXY) is trading neutrally at 104.15 on Wednesday, while markets assess several Federal Reserve (Fed) officials' statements to continue placing their bets on activity at the next few Federal Open Market Committee (FOMC) meetings.

The US Federal Reserve's hawkish hold, justified by a robust jobs report and continuous strong growth in Q1, has made dovish bets on the Fed less attractive over the past week. As a reaction, the USD strengthened on the back of rising US Treasury yields as markets are giving up on a first rate cut arriving in March.

Daily digest market movers: US Dollar holds its ground as markets assess Fed officials’ comments

• Fed’s Adriana Kugler noted that the job on inflation isn’t quite done, but that at some point when the economy cools down, the bank will consider rate cuts.
• Elsewhere, Neel Kashkari stated that two to three rate cuts in 2024 seem appropriate.
• In line with those comments, Susan Collins also cautioned that the bank needs more data to support rate cuts.  
• The CME's FedWatch Tool hints at reduced odds for a rate cut in March, which currently stands at 20%. Those odds rise to 50% for the May meeting, but the probabilities of a hold are also high.

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