December 13th 2023, 6:22:16 pm

(about 3 months ago)

The US dollar has maintained its strength.

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US equities experienced an upward trajectory as inflation in the United States continued to decrease on an annual basis. However, the pace of inflation cooling proved insufficient to validate the dovish sentiment that the market had priced in for anticipated rate cuts over the past couple of weeks. Over the last month, the S&P 500 and Nasdaq registered gains of 5.09% and 5.26%, respectively, while the S&P/TSX Composite added 2.82%.

Several weeks ago, a surge in market enthusiasm ensued over the anticipated rate cuts, causing both bond and equity markets to skyrocket. This sentiment was fueled by statements from US Central Bank officials indicating the conclusion of rate hikes and a willingness to implement rate cuts sooner.

Nevertheless, the core Consumer Price Index (CPI) released on Tuesday revealed a 0.3% increase in price levels in November, compared to a 0.2% increase in October. The year-over-year figure indicated a 3.1% increase.

The unemployment rate remains steady at 3.7%, the same rate observed when the Federal Reserve commenced interest rate hikes. The US Federal Reserve is not rushing to lower rates, considering the current economic data, and is cognizant of the potential for rate reductions to prompt another surge in prices. Current market expectations suggest that the first interest rate decrease is likely to occur around May 2024.

Although the US initially experienced a weakening in line with market expectations of lower rates, it has managed to regain some strength in the past few days. Analysis indicates that the US dollar is poised to remain dominant at least for the first few months of 2024.