20 Dec 2024

• The US Dollar Index marked 108.49, the highest level not seen since November 2022, in the previous session.
• The US Dollar strengthened as the Fed emphasized adopting caution regarding policy outlook.
• US Gross Domestic Product Annualized reported a 3.1% growth rate in Q3, exceeding the expected 2.8% increase.
• The US Dollar Index (DXY), which assesses the value of the US Dollar (USD) in relation to six prominent currencies, remains close to 108.50, a peak not observed since November 2022. This stability comes in the wake of the Federal Reserve's (Fed) aggressive 25 basis point (bps) rate reduction on Wednesday, which has adjusted its benchmark lending rate to a two-year low of 4.25%-4.50%.
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• The US Dollar experienced an increase as US Treasury bond yields rose by over 2.50% on Wednesday, following the Federal Reserve's cautionary stance regarding potential rate cuts. Fed Chair Jerome Powell articulated that the central bank would proceed with caution concerning further reductions, given that inflation is anticipated to remain consistently above the 2% target. At the time of this report, the yields for the 2-year and 10-year bonds were recorded at 4.30% and 4.56%, respectively.
  
  The Federal Reserve's monetary policy statement highlighted that economic activity continues to be strong, although it acknowledged a softening in labor market conditions. The Fed's Summary of Economic Projections (SEP), commonly referred to as the "dot-plot," indicated a forecast of only two rate cuts in 2025, a decrease from the four cuts previously anticipated in September.
  
  In the United States, data released on Thursday revealed that the Gross Domestic Product (GDP) Annualized recorded a growth rate of 3.1% in the third quarter, exceeding both market expectations and the earlier figure of 2.8%. Furthermore, Initial Jobless Claims fell to 220,000 for the week ending December 13, down from 242,000 the previous week and below the market estimate of 230,000.
  
  Market participants are expected to closely monitor significant economic indicators from the United States, including the Personal Consumption Expenditures (PCE) and the Michigan Consumer Sentiment Index, which are set to be published by the US Bureau of Economic Analysis on Friday.