The U.S. dollar has surged to a two-month high against major currencies as of October 10, 2024, driven by robust job data and a cautious approach from the Federal Reserve regarding monetary easing. This development highlights the strength of the U.S. economy in comparison to its global counterparts, with the euro and yen both weakening against the dollar.
The dollar index, which measures the currency's value against six major rivals, has remained steady after reaching highs not seen since August. This stability comes amidst revised expectations regarding interest rate cuts, following the release of strong jobs data. Economists predict that September's consumer price index (CPI) will reveal core inflation holding steady at a year-on-year rate of 3.2%.
In the current economic landscape, the euro has fallen to its lowest point since mid-August, while the dollar approaches its strongest position against the yen during the same period. Analysts have referred to this trend as 'U.S. exceptionalism trade,' underscoring the perceived strength of the U.S. economy.
Mary Daly, President of the San Francisco Fed, has indicated that her primary concern lies with the labor market's response rather than a resurgence in inflation. Market analysts currently estimate an 80% chance of a quarter-point rate cut in the Fed's upcoming policy decision, a slight decrease from the previous 85% probability. While the dollar index has remained relatively unchanged, the euro, along with the Australian and New Zealand dollars, has experienced minor declines against the U.S. dollar.