The U.S. dollar index hits a recent low, will the U.S. dollar continue to depreciate? The Federal Reserve’s decision in December is key – Free Finance

The U.S. dollar index hits a recent low, will the U.S. dollar continue to depreciate? Legal persons are optimistic that the December Fed decision is the key to the battle between bulls and bears. (Picture taken from juheng.com)

[Reporter Zhang Huiwen/Taipei Report]According to the Beige Book released by the Federal Reserve, the economy has slowed down in recent weeks and the outlook for the next 6 to 12 months has weakened. In addition, the excess savings that supported the U.S. economy in the past have continued to decline. Due to the Federal Reserve’s The meeting’s violent interest rate hikes have indeed achieved the goal of cooling the economy and suppressing inflation. The U.S. dollar index hit a new low in recent months on November 29. Will the U.S. dollar continue to depreciate? The legal person believes that relevant U.S. economic indicators are still strong and the U.S. dollar is supported, but interest rate cuts have also caused the U.S. dollar to decline. The main key to the future trend of the U.S. dollar index will depend on the decision of the U.S. Federal Reserve in December.

The Yuanta U.S. Dollar Index ETF research team pointed out that on November 29, the U.S. Department of Commerce announced the third quarter GDP (gross domestic product), with a quarterly growth rate of 5.2%, which was better than the initial value and the expected 4.9% and 5%, continuing A new high since the fourth quarter of 2021. From a detailed perspective, the key to the increase lies in investment and exports. The quarterly growth rates reached 10.5% and 6% respectively, which were better than the previous values ​​of 5.2% and -9.3%. Let’s take a closer look. In terms of investment, it mainly comes from the increase in non-residential fixed investment, including equipment and intellectual property rights.

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Although the quarterly consumption growth rate came to 3.6%, which was also better than the previous value of 0.8%, it was the lowest among all details. The key is that excess savings and new growth are lower than inflation. After the Federal Reserve began to tighten monetary policy, excess savings turned negative in 2022, resulting in weak consumption performance. In addition, inflation is rising higher than salary increases, which has also caused consumers to start to shrink their purchases. Consumer spending that supported the economy in the past will become a major pressure.

On November 30, the U.S. Department of Commerce announced the PCE (price index). The annual growth rate fell to 3% from 3.4% in the previous month, which was in line with market expectations and hit a new low since March 2021. The core PCE annual growth rate fell from 3.7% to 3.5%, which is also in line with market expectations. Inflation in the service industry excluding housing fell below 4% for the first time since 2021, showing that the decline in inflation is not seasonal or temporary in a single item, but an overall decline.

The Yuanta U.S. Dollar Index ETF research team believes that after the successive release of economic data and the recent public market talks by Federal Reserve officials, the general trend is dovish. The market expects the Fed to move forward on the path of interest rate cuts next year, and the probability of an interest rate cut in May next year. It has risen from 20% last week to more than 50% this week, causing U.S. bond yields and the U.S. dollar index to continue to decline. Follow-up observations will focus on economic data and the decisions of the December Federal Reserve meeting.

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