Scope For Further Dollar Gains: ActivTrades

There may be scope for further greenback gains, writes Ricardo Evangelista, Senior Analyst at ActivTrades.

The US dollar index, which measures the performance of the greenback versus a basket of other major currencies, hit a one-month maximum during early Wednesday trading.

The sudden burst happened after Christopher Waller, the Federal Reserve Governor, said a careful approach to rate cutting is required.

Above: The Dollar index in 2024.

These words reinforced the market sentiment that, despite the surprisingly dovish Fed meeting in December, officials at the central bank remain firmly committed to controlling inflation, leading to a reassessment of expectations on the part of traders in what concerns the timing and extent of rate cuts.

The probability of a first interest rate cut happening in March has been dropping since the beginning of the year, in a dynamic that accelerated after Waller's public address on Tuesday.

Against this background, the surge of the dollar in relation to its peers is not surprising, and with the euro struggling due to the lack of clarity from the ECB concerning the unwinding of its monetary policy, there may be scope for further greenback gains.