The dollar continues its rebound following last week’s strong performance. Labor market data, including NFP, indicated a resilient economy, increasing the likelihood of a soft landing and leading the market to lower expectations for a rate cut in March.
Upcoming inflation data and the Federal Reserve’s final meeting of the year will significantly influence market sentiment and the dollar’s trajectory for the following weeks.
The Euro is also in focus this week, ahead of the European Central Bank (ECB) meeting. The currency’s weakness has led to two weeks of losses against the dollar and historically low levels against the Swiss Franc.
Faster-than-expected slowing inflation and worsening economic conditions have led markets to anticipate an initial rate cut by the ECB in April. The latter could further weigh on the euro.
The Bank of England meeting (BoE) this week will also affect the pound’s performance and direction. The BoE could maintain its current rates for an extended period, compared to other major central banks, due to current inflation levels. The currency could also react to the GDP and job market data before the central bank meeting.