- US consumer sentiment came in higher than expected.
- Futures show that the likelihood of a rate cut as early as March has fallen below 50%.
- In the UK, data on Friday showed a big drop in retail sales.
Currency futures were mixed on Friday amid varied economic reports. At the same time, the dollar ended its recent winning streak. Still, it was a bullish week for the dollar because Fed rate cut bets went down with more positive data and hawkish remarks from Fed officials.
US consumer sentiment (Source: University of Michigan)
The University of Michigan released its preliminary reading on US consumer sentiment, which came in higher than expected. This is a sign that US consumers are more optimistic about the economy.
Fed policymakers have been trying to reduce market expectations for rate cuts, stating that inflation was still too high. As a result, there is confusion about when the Fed will start cutting rates. However, now, futures show that the likelihood of a rate cut as early as March has fallen below 50%.
Meanwhile, there was a mixed performance on currency futures amid data from various countries. In the UK, data on Friday showed a big drop in retail sales, raising concerns about a recession. As a result, the pound fell against the dollar.
Meanwhile, the Canadian dollar ended Friday and the week in the green as risk appetite grew in the market. Moreover, investors ignored data showing a drop in Canada’s retail sales. Still, the biggest catalyst for the Loonie throughout last week came from the rise in oil prices.
In Japan, there was a drop in core inflation figures, which saw the yen weaken. Still, the currency held steady because of the weaker dollar. Moreover, investors awaited the upcoming Bank of Japan policy meeting. Recent hopes for a shift to a hawkish stance by the BoJ have gone down. As a result, the yen has been on a sharp decline. For this reason, on Friday, Japanese officials warned investors that they were closely watching currency moves. Still, as long as the BoJ maintains its dovish outlook, the yen will likely continue falling.
The euro was slightly stronger on Friday as the dollar weakened. However, ECB policymakers started warming up to the idea of rate cuts. This might lead to a future decline in the currency. Additionally, JP Morgan changed its forecast for the first ECB rate cut from September to June.