Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar declined slightly against major currencies, while investors are preparing for the publication of key US data that may cause a revision of the Fed's monetary policy outlook. Meanwhile, experts warn that liquidity is getting thinner as we get closer to the festive season, and thin liquidity can exact price movements on any data surprises.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.09% to 102.32. Since the beginning of the month, the index has fallen by 1.1%. But given that 150 basis points of Fed cuts are already priced in for 2024, caution held off any further dollar selling, for now. As for the US data, the final GDP report for the 3rd quarter, as well as labor market data for last week, will be published today. Economists expect that GDP growth accelerated to 5.2% QoQ from 2.1% QoQ in the 2nd quarter, and initial jobless claims rose by 215 thousand after an increase of 202 thousand a week earlier. However, the key event of the week will be tomorrow's publication of the personal consumption expenditures price index (the Fed's preferred measure of inflation). Consensus estimates suggest that the core PCE price index grew by 0.2% over the month and by 3.3% per annum. Investors hope that this data will provide more clues about the outlook for the economy and the future of interest rates in the United States. According to the CME FedWatch Tool, markets see a 71.1% probability of a 25 basis point rate cut at the Fed meeting in March 2024 and a 98.9% probability of a rate cut in May 2024.

The yen rose 0.2% against the U.S. dollar after the Japanese government slightly raised its economic growth forecasts for this fiscal year, as external demand is likely to more than offset weak domestic consumption. The real economic growth rate for fiscal 2023 ending in March 2024 is estimated at 1.6%, up from 1.3% seen half a year ago. The economic growth rate is forecast to slow down slightly to 1.3% in the next fiscal year starting in April as the external demand contribution weakens sharply reflecting a rebound in domestic consumption. The fiscal 2024 economic growth projection is slightly higher than the previous estimate of 1.2%.