Anna 
On the first trading day of the year, the U.S. dollar exhibited a slight upward movement, drawing attention to the week’s upcoming economic data that could offer insights into the Federal Reserve’s potential actions. Concurrently, Bitcoin surged, breaching the $45,000 mark for the first time since April 2022.
The dollar index, measuring the U.S. currency against six counterparts, witnessed a 2% decline in 2023, interrupting two years of consecutive gains. Presently, it stands at 101.44, marking a 0.059% increase, as investors assess the likelihood of the Fed implementing rate cuts in the coming year.
The most significant impact of the dollar’s ascent was felt on the Japanese yen, depreciating by 0.35% to 141.36 per dollar, following a 7% slide in 2023. Rescue efforts in Japan faced challenges after a powerful New Year’s Day earthquake, resulting in over 20 reported casualties and widespread damage.
Market sentiment is currently reflecting an 86% probability of interest rate cuts by the Fed, commencing from March, according to the CME FedWatch tool. Expectations include over 150 basis points of easing throughout the year. Analysts are closely monitoring the timing and pace of these potential rate cuts, with a focus on economic data scheduled for release this week, including job openings and nonfarm payrolls. Additionally, Thursday’s release of the minutes from the December Fed meeting is anticipated to provide further insights into the central bank’s stance on rate cuts in 2024.
“The positive sentiment from end-2023 may roll over into this week as all eyes turn to the U.S. jobs report on Friday,” noted Nicholas Chia, a macro strategist at Standard Chartered.
In December, the Fed surprised markets with a dovish tone, forecasting 75 basis points in rate reductions for 2024. This stands in contrast to other major central banks, such as the European Central Bank (ECB) and the Bank of England (BoE), which have reiterated their commitment to maintaining higher rates for a longer duration. Traders are pricing in 158 basis points of cuts by the ECB and 144 basis points by the BoE in 2024.
The euro saw a 0.13% dip to $1.103, retracing from last week’s five-month peak of $1.11395. Despite this, the single currency closed 2023 with a 3% gain, marking its first yearly increase since 2020. Sterling, at $1.2729, experienced a 0.05% increase for the day, concluding 2023 with a robust 5% gain, its strongest performance since 2017.
In other currencies, the Australian dollar rose by 0.35% to $0.68335, while the New Zealand dollar remained relatively stable at $0.63155.
The crypto market commenced the year on a high note, with Bitcoin reaching a 21-month peak of $45,532. This surge is attributed to growing expectations of the U.S. Securities and Exchange Commission approving exchange-traded spot Bitcoin funds.
