Anna 
The dollar maintained its position on Thursday, experiencing a period of volatility with sharp declines followed by a rebound. Traders interpreted incoming economic data as an indication that the Federal Reserve might postpone interest rate cuts.
The dollar index, tracking the U.S. currency against six other units, steadied at 104.33. After a 1.51% plunge the previous day, the dollar gained 0.31% on Wednesday, marking its most substantial drop in a year for a single trading day.
The euro edged up approximately 0.1% at $1.0857, and the yen was at 151.16, reflecting a similar gain. Against sterling, the dollar remained flat at $1.24085.
The dollar found support from better-than-expected retail sales figures and additional signs of cooling inflation. This contributes to the narrative of an economic ‘soft landing,’ potentially giving the Federal Reserve more time before considering rate cuts.
Hargreaves Landsdown strategist Susannah Steeter commented on the fluctuating sentiment, stating, “We’re seeing the dollar trading weaker versus other currencies today, off the back of those retail sales that are putting a dampener on those hopes that, potentially, we could see a rate cut sooner rather than later.”
Traders are adjusting their expectations regarding the timing and extent of rate cuts. While the probability of rates going higher remains low, odds for a first reduction by March have dipped to less than 1-in-4 from better than 1-in-3 a day earlier, according to the CME Group’s FedWatch Tool.
Market sentiment remains uncertain as economic indicators evolve. Deutsche Bank strategist Jim Reid pointed out that this marks the seventh occasion in the last two years where markets have priced in a swift Fed shift to rate cuts. However, history shows that expectations have unwound in the past.
The Australian dollar eased 0.1% to $0.6502, and the New Zealand dollar fell 0.3% to $0.605. The Australian currency failed to gain substantial support from a robust rebound in employment, with traders focusing on the fact that gains were mostly in part-time labor, and the jobless rate ticked higher.
