The major banking institution HSBC has presented a view that's contradictory to the current mainstret direction about dollar's weakness in 2024, as the British bank expects strong peformance by the dollar.

As EUR/USD prepares to end this year above $1.1, HSBC expects the common currency to plumb 1.02 during 2024. 

That's because HSBC doesn't expect the Federal Reserve and other major central bank to ease monetary policies as much as markers expect. 

That's why HSBC is warning against too much optimism about the situation of monetary policies in 2024. 

Following the Fed's last meeting and prospects of early US interest rate cuts in 2024, the dollar tumbled while stocks gained ground.

Goldman Sachs revised its outlook to show increased interest rate cuts by the Fed in 2024, from one to five. 

However, the Fed's last meeting didn't change HSBC's outlook, taking a rare stance in support of the dollar in 2024. 

HSBC attributed dollar's recent weakness to slowing US inflation, while the Fed grows more bearish, however the bank expects the situation to change once again in 2024. 

HSBC says the Fed might not be able to ease monetary policies as fast as markets expect due to mounting geopolitical risks. 

EUR/USD prospects 

HSBC expects EUR/USD to reach 1.06 by the end ofthe first quarter of 2024, then 1.04 by mid 2024, and 1.02 by the end of the third quarter. 

Gold prices rose in European trade on Tuesday, maintaining gains for the second day and moving in a positive zone as the dollar lost ground as well against a basket of major rivals.

Dollar's decline comes as analysts expect the Federal Reserve to cut interest rates in March 2024.

Gold Prices Today

Gold prices rose 0.1% to $2,029 an oucne, with a session-low at $2,022, after rising 0.3% on Monday, resuming gains after a recent dip on profit-taking.

The Dollar

The dollar index fell over 0.1% on Tuesday, extending losses for a second session against a basket of major rivals.

A weaker dollar makes dollar-denominated metals cheaper to holders of other currencies., 

The decline came after the Federal Reserve announed the end of policy tightening last week, with policymakers now starting to discuss the prospects of interest rate cuts in 2024.

US Rates 

The markets are currently pricing a 72.5% chance of a 0.25% interest rate cut by the Federal Reserve at the March 2024 meeting. 

Now traders await important data later today including GDP dats and US unemployment claims later today. 

The SPDR 

Gold holdings at the SPDR Gold Trust remained flat yesterday at 879.69 tonnes, the highest since December 5. 

Euro rose in European trade on Tuesday against a basket of major rivals, extending gains for second straight day against the dollar as prospects of early ECB interest rate cuts in 2024 fade.

Especially so following the European Central Bank's policy meeting last week, and a string of bullish remaks by ECB officials in recent days. 

EUR/USD

EUR/USD rose 0.2% to 1.0941, with a session-low at 1.0912, after rising 0.3% yesterday yesterday, the fifth profit in the last six sessions, approaching two-week highs at 1.1009. 

As expected, the European Central Bank voted last week to maintain interest rates unchanged at 4.5% this week, already the highest in 22 years.

The ECB said that while inflation has receded in recent months, it could rebound again in the short term.

The ECB will hold onto current interest rate levels until inflation is brought back towards 2%.

It asserted that policy decisions will rely on upcoming data and inflation dynamics in upcoming months.

ECB President Christine Lagarde said the time is still not right to talk about cutting interest rates as inflation is still not consistently moving lower.

She added the ECB needs to monitor further data on wages and prices before taking new policy decisions.

Interest Rate Gap

The current European-US interest rate gap stood at 100 basis points, the lowest since May 2022, and is expected to shrink further in March 2024 when the Federal Reserve is expected to issue its first interest rate cut.

The ECB's position this week was more bullish than expected, reducing the odds for European interest rate cuts during the first half of 2024.

Conversely, the Fed openly started discussions about the next interest rate cut, with markets betting on the March meeting as the timing of the first such cut.

Copper prices declined on Monday as the dollar steadied against most major rivals amid uncertainity about the Federal Reserve's upcoming policy decisions. 

Copper three-month futures at the London Metals Exchange fell 0.3% to $8524 a tonne, while January copper futures at the Shanghai Exchange fell 0.2% to $9622 a tonne. 

The dollar index stabilized after New York Fed President said it's still too early to talk about interest rate cuts.

A drop in dollar usually boosts dollar-denominated metal futures and vice versa. 

However, copper is underpinned by potential drops in supply, especially from the FM.TO Cobre mine in Panama. 

Aluminium prices fell 0.7% at the London Metals Exchange to $2233, while nickel fell 1% to $16975, as zinc fell 0.8% to $2511, while lead shed 0.3% to $2075. 

Otherwise, the dollar index stabilized at 102.5 as of 16:21 GMT to 102.6, with a session-low at 102.3, 

Copper March futures fell 0.7% as of 16:14 GMT to $3.86 a pound.