Dollar index holds steady at 103.3, weekly gain expected

The dollar index held around 103.3 on Friday and was headed for a weekly gain as strong US data and hawkish messaging from Federal Reserve officials

By Ahmed Azzam | @3zzamous | 19 January 2024

Market open
  • Dollar index at 103.3 eyes gain on strong US data, Fed caution.

  • Fed's Bostic urges caution, sees no rate cuts until Q3.

  • Congress avoids shutdown with temporary funding through March 1-8.

  • US crude inventories lowest since October; weather, Libyan outages impact global oil supply.

The dollar index maintained its position around 103.3 on Friday, poised for a weekly gain. Robust US data and a hawkish tone from Federal Reserve officials tempered expectations of a March interest rate cut. Initial jobless claims unexpectedly dropped to 187K, the lowest since September, and December's retail sales exceeded expectations. Fed Governor Christopher Waller emphasized the economy's strength, reducing market expectations of a rate cut in March from 75% to 57%, according to CME's FedWatch Tool.

Fed officials cautious on rate cuts amid geopolitical uncertainty

Atlanta Fed Chief Raphael Bostic urged caution in considering rate cuts, highlighting the potential economic impact of unpredictable geopolitical events. Bostic sees no reductions until the third quarter. Patrick Harker expects inflation to ease toward the target.

US congress passes temporary spending bill to avert shutdown

To prevent a government shutdown, the US Congress approved a temporary spending bill, now awaiting Joe Biden's signature. The bill funds some agencies through March 1 and others through March 8.

US crude inventories decline to lowest since October

EIA reported a 2.49 million barrel drop in US crude inventories last week, reaching the lowest level since October. However, gasoline supplies increased. Severe winter weather shuttered 15% of the US Gulf Coast's oil-refining capacity, impacting production from prolific shale basins. Libya also experienced outages.