Narrowing Rate Differentials Could Weigh on Dollar, Lift Euro

0926 GMT – The U.S. interest-rate advantage versus the eurozone’s could narrow, weighing on the dollar and lifting the euro, if the Federal Reserve looks likely to begin interest-rate cuts before the European Central Bank, Carsten Mumm, chief economist at Donner & Reuschel private bank, says in a note. Fed rate cuts could start from spring 2024 given economic slowdown and expected further decline in inflation, while a second rate cut could follow in early summer as central bankers aren’t expected to implement any monetary policy measures close to elections, he says. Meanwhile, the ECB isn’t likely to follow suit until later. “Even if the imminent run-up to the EUR/USD 1.10 mark prevents further appreciation for the time being, the common currency is expected to strengthen in the coming months.” EUR/USD is up 0.1% at 1.0949. ([email protected])

Dollar Weakens as Market Ponders Fed Rate Cuts in 1H

0744 GMT — The U.S. dollar is trading weaker as investors ponder the possibility of a first interest-rate cut by the Federal Reserve in the first half of 2024, Bas Kooijman, CEO and asset manager of DHF Capital says. “The U.S. dollar began the week with a relatively weak performance, extending its selloff from last week,” he says in a note. Market expectations continue to lean toward no interest-rate hikes in December and a potential rate cut as early as May, and weigh on the currency, as inflation eased and Treasury yields retreated, he says. The DXY dollar index is almost 0.2% lower at 103.270. ([email protected])