Lamseen – The Indonesian rupiah depreciated against the U.S. dollar at the start of trading on Friday, following the announcement of strong economic growth in the United States. On Friday, August 30, 2024, the rupiah fell by 35 points or 0.23%, reaching 15,459 per U.S. dollar compared to the previous rate of 15,424 per U.S. dollar. Josua Pardede, Chief Economist at Bank Permata, explained that the appreciation of the U.S. dollar was influenced by recent U.S. data, which indicated that the U.S. economy remains robust.
“Despite high Fed policy interest rates and gradually easing labor market conditions,” Josua Pardede said, as reported by Antara.
The U.S. Gross Domestic Product (GDP) for the second quarter of 2024 grew by 3% quarter-on-quarter, revised up from 2.8% and up from 1.4% in the first quarter of 2024, reflecting solid economic performance.
Additionally, U.S. initial unemployment claims decreased by 2,000 from the previous week to 231,000 for the period ending August 24, 2024, aligning closely with the market expectation of 232,000.
Investors are now focusing on the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, which is set to be release on Friday. The PCE data will be crucial for investors in assessing the Fed’s future monetary policy direction.
The U.S. dollar also strengthened against the Euro, which weakened following lower-than-expected inflation figures from Germany and Spain, increasing the likelihood of an interest rate cut by the European Central Bank (ECB) in September 2024.
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The Euro weakened against the U.S. dollar after inflation data from Germany led investors to raise their expectations for a European Central Bank (ECB) rate cut.
Inflation in six major regions of Germany decreased in August, and inflation rates in Spain also slowed to their lowest pace in a year.
According to Channel News Asia, on Thursday, August 29, 2024, the Euro fell by 0.4% against the U.S. dollar to USD 1.1077, after trading at USD 1.1128 before the release of German inflation figures.
The market now anticipates that the ECB might reduce interest rates by up to 67 basis points in 2024, compared to about 63 basis points before the data was release.
Investors are also awaiting the release of the core Personal Consumption Expenditures (PCE) index in the U.S. on Friday, which is a key measure of inflation for the Federal Reserve and may provide clues about future interest rate adjustments.
Additionally, there is caution regarding the Euro ahead of elections in three eastern German states: Thuringia, Saxony, and Brandenburg, where right-wing and left-wing economic parties are expect to gain between 40% and 50% of the vote.
Thuringia and Saxony will vote on September 1, followed by Brandenburg on September 22.
“The results from Thuringia might come as a negative surprise for Euro watchers, who are sensitive to political developments suggesting uncertain prospects on the continent,” said Thierry Wizman, a global currency and interest rate strategist at Macquarie.
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