After a challenging 2023, the US dollar has rebounded as Wall Street begins to accept that interest rate cuts may not be coming as expected. The US dollar index, which tracks the greenback against six major currencies including the British pound, euro, Swiss franc, Japanese yen, Canadian dollar and Swedish krona, was up 2.8% for the year as of Friday morning. Despite investors growing optimistic in November that the Federal Reserve would soon cut interest rates after the US currency’s slide, recent economic data points to the idea that the Fed will keep rates higher for longer.
An impressive 353,000 jobs were added to the economy in January, highlighting the continued resilience of the labor market despite rising rates. The consumer price index rose by 3.4% year-on-year in December, remaining above the central bank’s target of 2%. A stronger dollar is bad for American companies and consumers when they spend on imported goods. However, when traveling abroad, Americans’ spending power increases as their currency strengthens.
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