Anna 
In the fourth quarter of 2024, the world’s second-largest economy, China, reported a year-on-year growth rate of 5.2%, marginally below market expectations of 5.3%. Quarterly figures revealed a 1.0% year-on-year rise in China’s Gross Domestic Product (GDP), aligning with projections. Despite these numbers, China’s retail sales for December grew by 7.4% year-on-year, falling short of the anticipated 8.0%. Concurrently, industrial production during the same period exceeded expectations, recording a 6.8% year-on-year increase compared to the forecasted 6.6%.
Adding to global economic concerns, geopolitical tensions intensified as Iran-backed Houthi rebels launched an anti-ship ballistic missile, targeting a U.S. freighter off the coast of Yemen. Investor anxiety surged in response to the escalation.
Supporting the U.S. dollar, recent dovish remarks from U.S. Federal Reserve Governor Christopher Waller contributed to market dynamics. Waller emphasized on Tuesday that, despite inflation nearing the central bank’s 2.0% target, a hasty approach to interest rate cuts should be avoided until lower inflation is clearly sustainable.
CME Group’s FedWatch tool indicates a shift in market sentiment, with the current likelihood of a Fed rate cut in March standing at 62%, down from 81% at the beginning of the week. The U.S. dollar remains influenced by the evolving expectations of less aggressive interest rate cuts from the Federal Reserve, driven by a chorus of hawkish voices within the central bank.
Attention now turns to the forthcoming U.S. retail sales data, seen as pivotal in shaping the dollar’s trajectory. The data release holds the potential to recalibrate market expectations for a Federal Reserve rate cut in the upcoming year.
