Late on Tuesday, the U.S. dollar saw gains as some Federal Reserve officials remained optimistic. This led to the dollar index, which measures the greenback against six major peers, increasing by 0.31 percent to 105.5460 in late trading.
Fed Governor Christopher Waller declared third-quarter U.S. economic growth, at an annualized 4.9 percent rate, as a “blowout performance” that requires monitoring as the Fed considers its next policy moves. Another Fed governor, Michelle Bowman, also expressed her belief that the recent GDP number is evidence that the economy “remained strong” and may have gained speed requiring a higher Fed policy rate. “I continue to expect that we will need to increase the federal funds rate further,” she stated.
Meanwhile, Chicago Fed President Austan Goolsbee raised concerns by stating, “Over the next couple of months, we might equal the fastest drop in inflation in the last century.”
The U.S. 10-year Treasury bond yield saw a five basis point drop to 4.598 percent after opening at around 4.64 percent on Tuesday. According to the CME FedWatch Tool, the odds of additional tightening have plummeted, with participants seeing a 20 percent chance for a 25-bp hike in January 2024. Additionally, rate cuts have begun to be priced in, with odds at 51.05 percent for a 25-bp rate cut in May 2024.
On Tuesday, European Central Bank’s vice president Luis de Guindos expressed concern that the eurozone’s economy is likely to contract slightly or at best stagnate in the fourth quarter.
Currency exchange rates saw the euro fall to 1.0694 U.S. dollars from 1.0723 U.S. dollars in the previous session, and the British pound drop to 1.2295 U.S. dollars from 1.2351 U.S. dollars.
The U.S. dollar also strengthened against the Japanese yen, Swiss franc, Canadian dollar, and Swedish krona in late New York trading compared to the previous session.
