Euro down as rate cut hopes fade

The Euro (EUR) has given away previous gains and turned negative in the daily chart after US Jobless Claims and housing data confirmed that the US economy has entered 2024 in good shape. US Jobless claims declined against expectations in the second week of January with housing starts and building permits resisting despite the tight credit conditions.

US Jobless claims eased to 187K in the week of January 12, down from 203K in the previous week and against expectations of an increase to 207K.

US Housing starts declined to 1.46 M. in December from the downwardly revised 1.525 M. in the previous month. The market had anticipated a wider decline to 1.426 M. US Building Permits increased to 1.495M in December, from 1.467 M. in November, well above the 1.48M expected. The high building permits suggest that construction activity will remain at strong levels in the coming months.
Today's figures come after, an upbeat US Retail Sales report, underscoring the resilience of US economy. This backs the recent comments by Federal Reserve (Fed) policymakers warning that it is still too early to claim victory against inflation and increase speculative demand for the US Dollar.

Before that, the US Dollar Index had retreated from one-month highs. The European Central Bank (ECB) President Christine Lagarde played down chances of monetary easing until next summer, at the Davos World Economic Forum on Wednesday providing a fresh boost to an ailing Euro.

The market keeps paring back hopes of Fed cuts in March. The CME Group Fed Watch Tool shows a 55% chance that the US central bank will start easing in March, from levels above 70% earlier this week.