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19/01/2024

The central banks of the United States and Japan are sharply divided, inflation data is "worse", and USD/JPY is above the 150 mark

In the Asian session on Friday (January 19), USD/JPY fluctuated higher and is currently up 0.13% and trading around 148.30, while Japanese inflation slowed to 2.6%, leading to increased uncertainty about the Bank of Japan's shift from ultra-loose to tightening. Currency investors are gradually tilting towards the US dollar as bets on an early rate cut by the Federal Reserve in March fall, and the Fed spokesperson's speech is expected to be a key catalyst in the future.

On Friday, Japan reported that the national consumer price index (CPI) fell to 2.6% in December from 2.8%, in line with consensus market expectations. Core inflation fell to 2.3% from 2.5%. Economists forecast core inflation at 2.3%. Recent inflation, wage growth and household consumption data have reduced bets on the BoJ's pivot, and weak inflation data could further affect the BoJ's plans to exit negative interest rates.

However, March's "spring fight" wage growth talks could spur the BOJ to pivot to tightening in the second quarter. Therefore, investors must pay attention to the reaction of the BOJ board members to the inflation data, and comments on the timing of the shift from negative interest rates also need to be considered.

Later on Friday, the US consumer confidence index will attract investors' interest. The upward trend in consumer confidence may signal a recovery in consumer spending. An improvement in consumer spending trends could spur demand-driven inflation. Rising inflationary pressures could force the Federal Reserve to postpone interest rate cuts to curb consumer spending and curb demand-driven inflation.

The long-term higher interest rate path affects borrowing costs and reduces disposable income, and a downward trend in disposable income could impact consumer spending.

Economists forecast that the Michigan Consumer Sentiment Index will rise to 70.0 from 69.7 in January, but investors must consider sub-factors, including inflation expectations, and other statistics include existing home sales data for December.

However, these numbers are likely to be second only to the Michigan report.

In addition to the numbers, comments from Federal Open Market Committee (FOMC) members also need to be considered. FOMC members Michael Barr and Mary Daly are scheduled to speak on Friday.

In the short-term outlook, the near-term trend for USD/JPY depends on forward guidance from the Bank of Japan, Fed rhetoric and US consumer confidence. A pick-up in consumer confidence and easing bets on a March rate cut by the Federal Reserve could tip the policy divergence in favor of the dollar.

USD/JPY technical analysis

FXEmpire analyst Bob Mason said that on the daily chart, USD/JPY is holding above the 50-day and 200-day moving averages, confirming a bullish price signal.

A break above the 148.405 resistance level for USD/JPY will leave the bulls running at the 150.201 resistance level.

However, a break below the 147.500 mark will support a move towards the 146.649 support, and a break below the 146.649 support will allow the 50-day MA to come into play.

The 14-day RSI is at 65.57, suggesting that USD/JPY will break above the 148.405 resistance before entering overbought territory.

On the 4-hour chart, USD/JPY is trading above the 50-day and 200-day moving averages, reaffirming a bullish price signal.

USD/JPY broke above the 148.405 resistance and will support its move towards the 150.201 resistance.

However, a break below the 147.500 mark will allow the bears to rush towards the 146.649 support.

The 14-period 4-hour RSI is at 70.24, suggesting that USD/JPY is in overbought territory and selling pressure at the 148.405 resistance level is likely to intensify.

U.S. stocks close: Interest rate cut expectations cooled, the three major indexes collectively closed lower, popular Chi...
17/01/2024

U.S. stocks close: Interest rate cut expectations cooled, the three major indexes collectively closed lower, popular Chinese concept stocks generally fell

Financial Associated Press, January 17 (Editor Xia Junxiong) On Tuesday Eastern Time, the three major indexes collectively closed down, and investors became more cautious in their expectations for an interest rate cut by the Federal Reserve.

(Minute chart of the three major indexes, source: TradingView) As of the close, the Dow Jones Index fell 0.62% to 37,361.12 points; the S&P 500 Index fell 0.37% to 4,765.98 points; the Nasdaq Index fell 0.19% to 14,944.35 points.

Federal Reserve Governor Waller said on Tuesday that as inflation continues to slow, the Federal Reserve is expected to cut interest rates this year, but the process should be done cautiously and not too hastily. He reiterated the Fed's forecast in December that there could be three interest rate cuts this year, while investors had expected six rate cuts during the year.

The 10-year U.S. Treasury yield climbed more than 11 basis points to 4.064%.

Boeing shares fell 7.9% after Wells Fargo downgraded the company from "overweight" to "wait and see" on the grounds that problems with the 737 Max 9 model will continue to exist.

AMD's stock price rose by more than 8%, hitting its highest closing price since November 2021, while Nvidia rose by 3%. The market is optimistic about the prospect of increased demand for artificial intelligence chips, and analysts have raised their target prices for AMD and Nvidia.

Popular stock performance

Most large technology stocks fell. Apple fell 1.23%, Microsoft rose 0.46%, Tesla rose 0.47%, Google fell 0.11%, Amazon fell 0.94%, Meta fell 1.88%, Nvidia rose 3.06%, AMD rose 8.3%, and Netflix fell 2.22%.

Popular Chinese concept stocks generally fell. The Nasdaq China Golden Dragon Index fell 3.81%, Alibaba fell 3.31%, JD.com fell 4.53%, Pinduoduo fell 3.68%, NIO fell 8.65%, and Xpeng Motors fell 9.77%. Ideal Automobile fell 4.27%, Bilibili fell 5.73%, Baidu fell 4.23%, NetEase fell 1.66%, Tencent Music fell 4.05%, and iQiyi fell 6.50%.

company news

[US semiconductor EDA company Synopsys announced that it will acquire industrial software company Ansys for US$35 billion]

Synopsys, the world's largest semiconductor EDA software provider, announced on its official website that it will acquire industrial software company Ansys for US$35 billion in cash and stock. The transaction is expected to close in the first half of 2025, subject to shareholder and regulatory approvals.

Synopsys CEO said that through the merger, Synopsys' semiconductor EDA solutions will be combined with the simulation and analysis capabilities of the Ansys software platform to provide more powerful and complete product services.

Synopsys shares rose 3% on Tuesday.

[U.S. judge blocks JetBlue and Spirit Airlines merger]

A U.S. federal judge blocks JetBlue Airways' acquisition of low-cost rival Spirit Airlines, a major victory for the Justice Department under Joe Biden. The Justice Department said the deal would push up ticket prices, affecting some of the most price-sensitive consumers.

In July 2022, JetBlue announced plans to acquire Spirit Airlines for $3.8 billion. The merger of the two companies will create the fifth largest airline in the United States. In March 2023, the U.S. Department of Justice filed an antitrust lawsuit against the transaction.

Affected by this news, Spirit Airlines plunged more than 47% on Tuesday, while JetBlue Airways rose nearly 5%.

[Google reportedly plans to lay off hundreds of jobs in ad sales department]

Google Chief Commercial Officer Philipp Schindler told employees in a memo on Tuesday that the search giant plans to cut hundreds of positions from its ad sales unit as part of a restructuring.

[Morgan Stanley’s fourth-quarter net revenue exceeded estimates]

Morgan Stanley's fourth-quarter net revenue was US$12.90 billion, compared with the estimate of US$12.75 billion. Wealth management net revenue was US$6.65 billion, estimated at US$6.4 billion; stock sales and trading revenue was US$2.20 billion, estimated at US$2.26 billion; fixed income, foreign exchange and commodities business sales and trading revenue was US$1.43 billion, estimated at US$2.26 billion. Estimated at US$1.47 billion.

[Goldman Sachs’ fourth-quarter net revenue beats expectations]

Goldman Sachs' fourth-quarter net revenue was US$11.32 billion, compared with an estimate of US$10.84 billion; fourth-quarter earnings per share were US$5.48, compared with US$3.32 in the same period last year. Goldman Sachs' fourth-quarter FICC business sales and trading revenue was US$2.03 billion, compared with the estimate of US$2.58 billion. Goldman Sachs' fourth-quarter equity sales and trading revenue was US$2.61 billion, compared with the expected US$2.25 billion.

[U.S. SEC: JPMorgan Chase will pay a fine of $18 million for violating whistleblower protection rules]

On January 16, the U.S. Securities and Exchange Commission (SEC) announced a settlement of charges against JPMorgan Chase, which prevented hundreds of customers from reporting potential securities law violations to the SEC. JPMorgan Chase agreed to pay an $18 million civil penalty to settle the charges.

The SEC said that from March 2020 to July 2023, JPMorgan Chase regularly required retail customers to sign confidentiality agreements when obtaining more than $1,000 in credit or settlement from the company. The agreement requires the client to maintain confidentiality of the settlement and all underlying facts related to the settlement and all information related to the disputed account. Additionally, while these agreements allow customers to respond to SEC inquiries, they do not allow customers to voluntarily contact the SEC. JPMorgan violated Section 21F-17(a) of the Securities Exchange Act of 1934, a whistleblower protection rule that prohibits taking any action to prevent an individual from communicating directly with SEC staff regarding possible violations of securities laws.

Crude Oil Trading Alert: The strength of the US dollar offsets the interference of the Red Sea, and oil prices rise agai...
17/01/2024

Crude Oil Trading Alert: The strength of the US dollar offsets the interference of the Red Sea, and oil prices rise again and fall back.

Oil prices came under pressure on Tuesday (January 16) as the dollar rose to its highest level in a month, but were supported by concerns about the impact of escalating tensions in the Middle East on energy supplies. Record U.S. production and rising output from some members of the Organization of the Petroleum Exporting Countries (OPEC) also suggest that oil markets will be tighter in early 2024 than initially expected.

The settlement price of WTI crude oil futures fell by US$0.28/barrel, or 0.39%, from the settlement price on Friday, closing at US$72.40/barrel. Affected by the situation in the Middle East, US oil rose by more than 1% to US$73.54/barrel at one point, but then fell by The rise turned down, mainly due to the pressure of the strengthening US dollar.

(U.S. West Texas Intermediate (WTI) crude oil futures chart)

Global benchmark Brent crude oil futures rose $0.14/barrel, or 0.2%, from Monday’s settlement price, closing at $78.29/barrel. During the session, Brent crude oil futures rose by $1/barrel. As of press time, it is currently trading at US$77.79 per barrel, a decrease of 0.47%.

[Market News Analysis]

"Oil prices are looking for direction," said Rob Thummel, managing director at energy investment firm Tortoise Capital.

The dollar hit a one-month high as investors lowered expectations for an interest rate cut by the Federal Reserve in March, putting pressure on prices. A stronger dollar weakens demand for dollar-denominated oil from buyers using other currencies.

Net production from U.S. crude oil production facilities increased slightly this week, with Permian Basin output climbing 55,000 barrels per day to 5.974 million barrels per day, according to the U.S. Energy Information Administration (EIA), pushing production higher despite a slight slowdown. Crude oil production from the Eagle Ford production center (down 2,000 barrels per day to 1.147 million barrels per day) and Bakken oil production facilities (down 500 barrels per day to 1.303 million barrels per day).

U.S. oil production continues to fully outpace OPEC's global production cuts, and North American crude output is set to climb further as Canadian oil producers ramp up output as the Trans Mountain pipeline nears completion.

According to Canadian news agency BNN Bloomberg, Alberta's oil production hit a record high in November, reaching 4.2 million barrels per day, an increase of 8.8% month-on-month. By comparison, Alberta's production in the first 11 months of 2023 averaged 3.8 million barrels per day. Canadian crude oil production increased in November, making Canada the world's fourth-largest oil producer.

Jay Hatfield, a portfolio manager at Infra Cap in New York, said forecasts of warmer weather later in January in major U.S. production centers are also weighing on prices. A severe winter storm shut down U.S. Gulf Coast refineries in Texas, triggered outages at other refineries and cut oil production in North Dakota in half as it inflicted damage on swaths of the country, Reuters reported. Comes snow and rain.

Total Energies' 238,000 barrels per day refinery in Port Arthur, Texas, was inspecting units after a plant-wide blackout Tuesday morning as a winter storm brought freezing temperatures to the U.S. Gulf Coast, according to sources familiar with the company's operations. . The state's oil production fell by half on Tuesday due to extreme cold weather and operational challenges, the state's Pipeline Authority said. According to the North Dakota Pipeline Authority, oil production is expected to decrease by 600,000 barrels per day to 650,000 barrels per day.

A fluid catalytic cracking unit and a coking unit that produce gasoline at ExxonMobil's Baytown refinery in the Houston suburb of Texas, which produces 564,440 barrels per day, failed due to severe cold weather. Normal operation has resumed.

FlintHills Resources said its 343,000-barrel-per-day refinery in Corpus Christi, Texas, was severely affected by unseasonably cold weather, especially at its west plant, where instruments operating equipment were affected by freezing rain overnight.

However, meteorologists predict that between January 22 and 31, the weather in the lower 48 states of the United States will change from colder than normal this week to mostly warmer than normal. By then, production cuts are expected to slow down.

Oil prices were supported by signs of rising tensions in the Middle East as the U.S. military launched new strikes against four Houthi anti-ship ballistic missiles in Yemen. Houthi attacks on Red Sea shipping have been disrupting global cargo movements on key trade routes. "Tensions are rising in the Middle East, so the geopolitical risk premium on oil prices should also rise," Tumel said. On Tuesday

, concerns about conflict spread across the region as Iran sparked a diplomatic spat by attacking targets in Iraq's semi-autonomous Kurdistan region. Concerns of contagion intensify. Iran has also attacked Islamic State strongholds in Syria.

British oil giant Shell has suspended all oil shipments through the Red Sea indefinitely, according to people familiar with the matter, according to the Wall Street Journal, after the United States and Britain's attack on Yemen's Houthi rebels raised concerns about a further escalation of the situation. Last month, an oil tanker chartered by Shell was targeted by a drone in the Red Sea and harassed by Houthi vessels, shipping officials said. The company had taken steps last week to halt all shipping activities due to concerns that a successful attack could trigger a large-scale oil spill in the area and pose risks to crew safety, people familiar with the matter said. BP said last month it would suspend all shipping through the key Red Sea waterway, and Qatar Energy did the same this week.

The CEO of Chevron said, "We will make decisions on a ship-by-ship basis when it comes to navigation in the Red Sea. There are 'dynamic and unstable' risks in the Red Sea."

According to the "Nihon Keizai Shimbun" report, as of the 16th local time, Nippon Yusen, Japan's three major shipping companies, including Mitsui O.S. Lines and Kawasaki Kisen Lines, have decided to stop all ships from passing through the Red Sea.

City Index analyst Fiona Cincotta said that despite the escalation, oil traders appeared to be waiting for conclusive evidence of supply disruptions before pushing prices higher.

Shipping rates between Shanghai and the United States have soared due to the ongoing military conflict in the Red Sea region, according to the Shanghai International Shipping Research Center. The cost of a 40-foot container shipped from Shanghai to the U.S. West Coast has doubled from $2,000 at the end of December last year. Shipping rates to the U.S. East Coast jumped from $3,600 to about $6,000.

Federal Reserve Governor Waller said he did not believe the conflict in the Red Sea would affect global inflation. Waller said: "Shipping does not necessarily need to go through the Red Sea; there may be a one-time impact on costs, but there will be no impact on underlying inflation."

The CEO of oil trader Gunvor said, "The crude oil market is in a small surplus and the refined products market is tight. Since the Red Sea poses little threat to oil production, oil prices will remain at around US$70/barrel to US$80/barrel."

It is worth noting that China is the world's largest oil importer, and the substantial recovery of China's economy will push up oil prices. .

[Wednesday’s trading day focuses on financial data and events (Beijing time)]

①To be determined, OPEC releases monthly crude oil market report
②10:00 China's fourth quarter GDP annual rate, China's 2023 full-year GDP growth rate, China's 2023 full-year GDP total, China's December total retail sales of consumer goods annual rate, China's December above-scale Annual rate of industrial added value
③15:00 UK December CPI and monthly retail price index
④15:05 European Central Bank President Lagarde interviewed
⑤18:00 Euro zone December CPI annual rate final value and monthly rate
⑥21:30 US retail sales in December Sales monthly rate, U.S. import price index monthly rate in December
⑦22:15 U.S. industrial output monthly rate in December
⑧23:00 U.S. January NAHB housing market index, U.S. commercial inventory monthly rate in November
⑨23:15 European Central Bank President Laga Germany gave a speech
10. The next day 00:15 European Central Bank President Christine Lagarde gave a speech
11. The next day 03:00 The Federal Reserve released the Beige Book of Economic Conditions
12. The next day 04:00 Fed Williams gave a speech
13. The next day 05:30 API crude oil inventories in the United States for the week to January 12

The world is ushering in the largest "election year" in history! JPMorgan: The global economy and stock markets will be ...
15/01/2024

The world is ushering in the largest "election year" in history! JPMorgan: The global economy and stock markets will be under pressure

Financial Associated Press, January 15 (Editor Liu Rui) 2024 is the largest "election year" in global history.

According to statistics, more than 50 countries and regions around the world will stage election dramas this year. Among them, elections in major countries such as the United States and Russia have affected the world's nerves. This year’s elections in various countries will cover nearly half of the world’s population, and are expected to be the year with the most elections and the broadest coverage of the population in history.

JPMorgan Chase wrote in a recent report that as we enter this "election year", elections in many countries are expected to have a significant impact on the economy and stock markets. The global economy is expected to face downward pressure, while stock markets are likely to exhibit more volatility.

Global economic growth is under pressure

In addition to the general elections that will be held in the United States and Russia in November and March respectively this year, the new European Parliament elections will also be held from June 6 to 9. British Prime Minister Rishi Sunak also recently revealed that his plan is to hold general elections in the second half of this year. In addition, many countries such as Mexico, Indonesia, and South Africa will also hold general elections this year.

JP Morgan strategists wrote in a report that four trends are likely to continue in the election results in many countries around the world - polarization, populism, democratic deterioration and geoeconomic fragmentation .

They wrote:

"Many elections are likely to be close ones. Some countries recognize that populists cannot achieve their goals, while others remain fascinated by populists. But overall, we think these trends are unlikely to change , so we believe the election fever in 2024 will ultimately have a negative impact on global growth, depressing the performance of growth stocks relative to value stocks ."
The report said populist regimes often push for large-scale policy reforms, which tend to drive up inflation in the short term. They also mean more borrowing and trade restrictions, which are downward forces on global economic growth.
The U.S. election has the greatest impact

Of all the elections, JPMorgan expects the U.S. election to be the most important. Judging from the current poll results, this year's US election is likely to see another showdown between Biden and Trump.

The report stated:

“We believe the U.S. election is more consequential and worth hedging than any other election, as a Trump victory could have broader macro implications, including undoing or reversing many of Biden’s policies through a series of executive orders policy ."
One of Trump's expected policies is to impose general tariffs of 10%, which is expected to trigger a full-scale trade war. If implemented, this could push the U.S. dollar up 4%-6% in the foreign exchange market. At risk of depreciation will be the yuan, the euro and the Mexican peso .
Uncertainty over U.S. and other global elections will also cause VIX to rise, while a potential recession will worsen the situation. JPMorgan strategists found that the volatility of the S&P 500 is 2 points higher in U.S. election years than in non-election years.

"As such, investors looking to position themselves for election uncertainty and a resurgence of populism should prepare for higher risk premiums and higher market volatility," the report said.
Deterioration of democracy will lower stock market returns
In addition to populism, JPMorgan Chase said that another key theme to watch in this election year is the continued erosion of "democracy indicators", which will also have an impact on the market.

JPMorgan Chase cited the findings of independent watchdog organization "Freedom House" and others, saying that the decline of global democracy and freedom has become a trend in the past 17 years.

"Weaker governance contributes to higher volatility and lower price-to-earnings ratios, and we find that after a democracy indicator downgrades, stock returns over a 10-year period are on average 5% lower than in countries that upgrade this indicator," JPMorgan said.

USD/JPY is fighting at the 145 mark, and the Fed’s bets on interest rate cuts in March are approaching 80%. Analysts: If...
15/01/2024

USD/JPY is fighting at the 145 mark, and the Fed’s bets on interest rate cuts in March are approaching 80%. Analysts: If it falls below 144.71, it will look towards the 200-day moving average

In the Asian market on Monday (January 15), USD/JPY fluctuated around the 145.00 mark, but as the Federal Reserve’s bets on cutting interest rates in March approached 80%, short selling continued to intensify. Market analysts believe that the rebound in U.S. retail sales data may delay the interest rate cut schedule, and Japan's weak inflation data may allow the Bank of Japan to maintain interest rates at negative values, thereby boosting the bullish trend of USD/JPY.

On Monday, December machine tool orders will pique investor interest. Improving demand for Japanese goods could support the Bank of Japan's bets to move away from negative interest rates. Recent economic indicators, including weak inflation and wage growth, have eased bets that the Bank of Japan will exit negative interest rates.

However, a pick-up in economic activity is likely to support wage growth and disposable income. The upward trend in disposable income is likely to stimulate household spending and demand-driven inflation. Wage growth and demand-driven inflation remain the focus of the Bank of Japan, with economists forecasting a 9.0% year-on-year drop in orders for machinery tools in December.

Orders for machine tools fell 13.6% year-on-year in November, and investors will have to pay attention to comments from the Bank of Japan following recent data on household spending, inflation and wage growth. Mention of exiting negative interest rates could impact buyer demand for USD/JPY.

On Monday, investors will have to pay attention to comments from members of the Federal Open Market Committee (FOMC). Reactions to the recent U.S. consumer price index (CPI) and U.S. producer prices (PPI) may affect expectations for a rate cut by the Federal Reserve in March, with the inflation report raising bets on a rate cut in March.

Federal Open Market Committee (FOMC) members supported a higher, longer path for interest rates, potentially changing expectations for a rate cut by the Fed in May.

According to CME's Fed Watch tool, the probability of a rate cut in March rose from 64.0% to 76.9% last week. There were no U.S. economic indicators to influence USD/JPY on Monday, with U.S. markets closed for Martin Luther King Jr. Day.

On the short-term outlook, the near-term trend of USD/JPY depends on U.S. retail sales, Japanese inflation and central bank comments. A pickup in U.S. consumer spending could delay a rate cut by the Federal Reserve, and weak inflation data in Japan could allow the Bank of Japan to keep interest rates in negative territory. Easing bets on the Bank of Japan moving to negative interest rates would support a return to 146 for USD/JPY.

USD/JPY technical analysis

FXEmpire analyst Bob Mason said that on the daily chart, USD/JPY remains below the 50-day moving average while remaining above the 200-day moving average, confirming the recent bearish but long-term bullish price signal.

A break above the 50-day EMA in USD/JPY will allow bulls to run the resistance at 146.649.

However, a break below the 144.713 support would support a drop to the 200-day EMA.

The 14-day RSI is at 53.38, indicating that USD/JPY will rise to the 146.649 resistance before entering overbought territory.

On the 4-hour chart, USD/JPY remains above its 50-day and 200-day moving averages, sending a bullish price signal.

A rise in USD/JPY towards the 146 mark will keep bulls running on the 146.649 resistance.

However, a break below the 200-day EMA and support at 144.713 would support a break below the 50-day EMA below 144.

The 14-period 4-hour RSI is at 51.78, indicating that USD/JPY will rise to the 146.649 resistance before entering overbought territory.

Dollar gains before inflation data, bitcoin slipsBy Karen BrettellNEW YORK (Reuters) - The dollar rose against the euro ...
10/01/2024

Dollar gains before inflation data, bitcoin slips

By Karen Brettell

NEW YORK (Reuters) - The dollar rose against the euro and yen on Tuesday as traders awaited inflation data on Thursday for clues on when the Federal Reserve is likely to cut rates.

In cryptocurrencies, bitcoin dipped but remained near its strongest level since April 2022 as anticipation mounted the Securities and Exchange Commission will imminently approve spot bitcoin exchange-traded funds (ETFs).

The dollar index had hit a five-month low in December when investors priced for the likelihood that the Fed will cut rates sooner rather than later as inflation eases closer to its 2% annual target and economic data shows signs of softness.

It has recovered from some of that weakness this year, with the sell-off seen by some as overdone heading into year-end. But Fed expectations are likely to continue to drive dollar moves.

“Throughout December the theme was really the Fed pivoting amidst weaker data,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

“At this point we’re pricing in a significant amount of easing from the March meeting and the risk/reward is tilted to a degree. Maybe there are some market participants out there that look at what’s priced in and are easing up on their dollar shorts that were initiated in December,” he added.

The release on Thursday of the consumer price inflation report for December will be the main piece of economic data this week. It is expected to show headline inflation rose 0.2% in the month and by 3.2% on an annual basis.

If the data confirms that inflation is continuing to moderate it could boost expectations for a March rate cut, though if it comes in above expectations it could also reverse some of that pricing.

Fed funds futures indicate a 64% probability of a March rate cut, down from 70% a week ago, according to the CME Group’s FedWatch Tool.

"The market is still trying to find its feet in terms of the trajectory and timing of the first U.S. rate cut," said Kamal Sharma, senior G10 FX strategist at Bank of America (NYSE:BAC), who expects the Fed to start cutting rates at the March meeting.

"Our base case scenario is for a soft landing, lower dollar, bull steepening and that broadly should be supportive of risk assets more generally," Sharma added.

Data on Tuesday showed that the U.S. trade deficit unexpectedly narrowed in November as imports of consumer goods fell to a one-year low amid slowing domestic demand, a trend that, if it persists in December, could result in trade having no impact on economic growth in the fourth quarter.

The U.S. dollar index, which measures the greenback against a basket of six currencies, was last up 0.26% at 102.57.

The euro dipped 0.23% to $1.09250, while sterling slipped 0.39% to $1.26990.

In Asia, data on Tuesday showed core inflation in Japan's capital slowed for the second straight month in December, taking some pressure off the Bank of Japan to rush into exiting ultra-loose monetary policy.

The dollar was last up 0.25% at 144.54 yen.

Bitcoin fell 0.26% to $46,874, after reaching a 21-month high of $47,281 on Monday.

Investment managers had on Monday disclosed the fees they plan to charge for their proposed spot bitcoin ETFs, in another step toward approval this week by the U.S. securities regulator.

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