A resurgent dollar is more likely to stay strong than not over the coming months, according to foreign exchange strategists polled by Reuters, as markets reassess how soon the Federal Reserve may.
The Canadian dollar is set to strengthen over the coming year if the U.S. Federal Reserve cuts interest rates as expected, but its gains could be held in check as mortgage renewals weigh on.
A resurgent dollar is more likely to stay strong than not over the coming months, according to foreign exchange strategists polled by Reuters, as markets reassess how soon the Federal Reserve may cut interest rates. Various Fed officials pushed back on rampant market speculation for a rate cut in March, with the probability now down to less than 20% from a peak of around 90%, according to rate futures. A blowout U.S. jobs report for January, clear hints from the U.S. central bank after the end of a policy meeting last week, and a follow-up television interview with Fed Chair Jerome Powell have quashed most remaining hopes of early rate cuts.
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The U.S. Federal Reserve will wait until the second quarter before cutting interest rates, according to a majority of economists polled by Reuters, with June seen more likely than May and less easing forecast this year than markets now expect. Since September, economists have broadly expected the first rate cut around mid-2024, but since last month's Fed meeting markets began pricing in a move in March after Chair Jerome Powell said that a discussion of cuts was coming "into view". Only a few days ago, federal funds futures pricing for the first cut shifted to May after at one point markets gave a 90% chance of a move in March, as most recent data and Fed officials' comments cooled early rate cut expectations.