The Dollar's Decline

The dollar went up yesterday, but it's not doing so well overall this year. It is actually on track to have its first annual loss since 2020 against the euro and other currencies. This is because people think that the US central bank will start lowering interest rates next year. People are wondering when exactly this will happen and if it's because inflation is going down or because the US economy is slowing down.

Since early 2022, people have been paying attention to how much the US central bank will raise interest rates. But now, with the US economy showing signs of slowing inflation, people are more focused on when the central bank will start cutting interest rates instead. This idea gained more support after the central bank's meeting in December.

So, while the dollar went up a bit recently, it's still going to end the year with a loss. It's down 2.10% for the year and 4.62% for the quarter, which is the worst it's been in a year.

Other Currencies' Performance:

• The euro is on track to have a 3.04% gain this year, which is its first positive year since 2020.
• The British pound is doing well with an annual gain of 5.39%, its best performance since 2017.
• The dollar is expected to have an annual gain of 7.56% against the Japanese yen because of the Bank of Japan's loose monetary policy.
• The Swiss franc is one of the best performing currencies this year. The US dollar lost 8.99% against it, which is the worst it's been since 2010.
• Bitcoin, a type of digital currency, is on track to gain 154% this year.

Oil Markets

Now let's talk about oil. The price of oil went down more than 10% this year because of problems around the world with oil production. Brent crude and US West Texas Intermediate crude both went down in 2023, reaching their lowest levels since 2020 when the pandemic caused a drop in demand and prices.

Last year, Brent crude went up by 10% and US West Texas Intermediate crude went up by 7% because people were worried about supplies during the Russian-Ukrainian war.

Experts think that the average price of Brent crude will be around $82.56 per barrel in 2024. They believe that global growth will slow down, which will limit demand for oil. However, ongoing tensions in different parts of the world might keep prices from dropping too much.

People are also wondering if the Organization of the Petroleum Exporting Countries (OPEC) and its allies will actually stick to the supply cuts they promised to help keep prices up. Right now, they are reducing production by about 6 million barrels per day, which is 6% of the world's oil supply.

Lastly, the war in the Middle East has made people worried about possible disruptions in oil supply. This has been a concern for the past few months and is expected to continue into 2024.

Source: Reuters