Euro fell in European trade on Monday on track for the fifth loss in a row against the US dollar, plumbing 26-month lows amid a grim outlook about the common currency’s performance in the first half of the year. 

Markets expect the European Central Bank to cut interest rates at the January meeting, which would widen the interest rate gap with the US in favor of the dollar.

A survey conducted by Reuters showed that many forex analysts expect the EUR/USD pair to reach parity during the first half of the year.

The Price

The EUR/USD pair fell 0.3% to $1.0207, the lowest since November 2022, with a session-high at $1.0250.

The pair fell 0.6% on Friday, marking the fourth loss in a row following strong US labor data.

The euro lost 0.7% last week, marking the sixth weekly loss in a row, and the longest such streak of losses since July 2023.

European Rates

Markets are estimating a 60% chance of an ECB interest rate cut in January.

It comes as eurozone prices overall trend towards the 2% target in the medium term.

US Rates

The recent US payrolls report showed the economy added more jobs than expected in December, while unemployment fell unexpectedly in another sign of the tight US labor conditions.

The report tanked the odds of a Fed 0.25% rate cut in January from 7% to just 2.5%.

Now investors await important US inflation data this week to gather more clues.

The Rate Gap

The US-Eurozone interest rate gap currently stands at 135 basis points in favor of the US, and will likely expand to 160 basis points in January.

The Japanese yen rose in Asian trade on Monday and expanded gains for the third straight session away from a six-month trough against the US dollar on speculation about the Bank of Japan’s future policies.

Media sources indicated that recent wage increases and rises in import costs due to the weaker yen might prompt the BOJ to act against such inflationary pressures. 

The Price

The USD/JPY fell 0.3% today to 157.26 yen per dollar, with a session-high at 157.96.

The yen rose 0.3% on Friday, the second profit in a row, away from a six-month trough at 158.87.

The yen remains under the supervision of Japanese authorities, which repeatedly sounded the alarm about the yen’s excessive weakness.

The yen lost 0.3% against the dollar last week, marking the fifth weekly loss in the past six weeks as US 10-year treasury yields rallied.

BOJ

The latest reports indicated the BOJ is considering a hike to its core inflation forecasts in the 2024-2025 financial year, reflecting increasing worries about inflation.

Reuters’ sources said the BOJ will likely raise its inflation forecasts at the January policy meeting, which paves the way for a likely intervention.

Japanese Rates 

The markets are estimating a 55% chance of a BOJ interest rate hike at the January meeting, while waiting for more data this week to gather more clues.

Gold prices gained ground on Friday even as the dollar rose against most major rivals with US yields advancing following the US payrolls report. 

The US economy added 256 thousand new jobs in December, beating estimates of an addition of 164 thousand new jobs, with the previous reading revised to show the addition of 212 thousand jobs. 

US unemployment fell to 4.1% in December from 4.2% in November, beating estimates of 4.2%.

That means the US economy has added 2.2 million jobs in 2024 jobs, a slight drop from the 3 million drop in 2023, but still beating pre-covid numbers of two million in 2019.

Now investors see a 97% chance of no change in Federal Reserve interest rates later this month.

US two-year treasury yields rose by 10 basis points to 4.35% as of 04:56 GMT, while 10-year yields rose by 8 basis points to 4.765%, as 30-year yields rose by over 7 basis points to 4.987%.

On trading, the dollar index rose 0.4% as of 19:59 GMT to 109.6, with a session-high at 109.9, and a low at 109.08.

On trading, gold spot prices rose 1%, or $26.5 to $2717 an ounce, marking a weekly profit of 2.3%.

The US dollar rose against most major rivals on Friday and expanded the gains after the release of the payrolls report, while US treasury yields surged, sending the dollar towards the sixth weekly profit in a row. 

The US economy added 256 thousand new jobs in December, beating estimates of an addition of 164 thousand new jobs, with the previous reading revised to show the addition of 212 thousand jobs. 

US unemployment fell to 4.1% in December from 4.2% in November, beating estimates of 4.2%.

That means the US economy has added 2.2 million jobs in 2024 jobs, a slight drop from the 3 million drop in 2023, but still beating pre-covid numbers of two million in 2019.

Now investors see a 97% chance of no change in Federal Reserve interest rates later this month.

US two-year treasury yields rose by 10 basis points to 4.35% as of 04:56 GMT, while 10-year yields rose by 8 basis points to 4.765%, as 30-year yields rose by over 7 basis points to 4.987%.

On trading, the dollar index rose 0.3% as of 15:37 GMT to 109.5, with a session-high at 109.9, and a low at 109.08.

Loonie

The Canadian dollar fell 0.3% against its US counterpart as of 16:05 GMT to 0.6927.

The Canadian economy added 90.9 thousand new jobs in December, beating estimates of an addition of 24.9 thousand, and up from the addition of 50.5 thousand jobs in November. 

Canada's unemployment rate fell to 6.7% in December, below estimates of 6.9%, and better than November's 6.8% reading. 

Aussie 

The Australian dollar fell 0.8% against its US counterpart as of 16:05 GMT to 0.6147.