During today's Asian trading, the US dollar consolidated against major currencies, remaining near a 2-year high, while trading volumes have begun thinning out and the main focus for investors remains that of the Fed's rate outlook.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.02% to 108.23. Since the beginning of December, the index has added 2.35%, and is preparing to record the third monthly increase in a row. As for the Fed's policy outlook, markets are now pricing in just about 35 basis points of easing for 2025. Experts said that given the "hawkish" mood of the Fed's December meeting, policymakers will probably prefer to wait for additional economic data before finally resuming or potentially completing this cycle of monetary policy easing. According to the CME FedWatch Tool, markets see an 8.6% probability of a 0.25% rate cut in January (compared to 8.6% a week ago), while the probability of an additional rate cut in March is 43.4%.
The yen was trading steadily against the US dollar, remaining near its lowest level since July 19, despite statements from the Japanese government. Japan’s economy is projected to reach full capacity in the next fiscal year, marking the country’s first positive output gap in seven years, the government announced. The Cabinet Office estimates a +0.4% output gap in the fiscal year starting in April, signaling robust demand driven by a tight labor market. The Bank of Japan (BOJ) monitors the output gap closely as an indicator of sustainable economic expansion and demand-driven inflation. The Cabinet Office anticipates consumer price index (CPI) growth, including fresh food, to slow to 2% in the next fiscal year, down from 2.5% this year.