The dollar remained largely stable on Monday as investors awaited additional insights to navigate the trajectory of US interest rates amid cautious remarks from Federal Reserve officials, despite indications of cooling inflation.
The Japanese yen began the week on a slightly weaker note, hovering around 155.80 per dollar, with traders closely monitoring for any signs of government intervention amidst tight trading ranges in recent sessions.
Last week’s data revealed a moderation in US consumer prices for April, prompting markets to price in the possibility of 50 basis points, or at least two rate cuts this year. However, varying statements from Fed officials have tempered expectations, with traders currently pricing in approximately 46 basis points of easing for the year, with only a November rate cut fully factored in.
In early trading on Monday, the euro edged up by 0.07% to $1.087525, approaching the nearly two-month high of $1.0895 reached last week. The dollar index, gauging the US currency against six counterparts, showed minimal change at 104.46.
Attention now turns to the release of the Personal Consumption Expenditures price index report on May 31, considered the Fed’s preferred measure of inflation. Analysts remain skeptical about the possibility of rate cuts in the upcoming June or July meetings, citing insufficient data. However, speculation grows about potential rate adjustments later in the year, with Chair Powell’s remarks at the Jackson Hole conference in August possibly setting the stage for a September cut, contingent upon favorable economic data.
Market participants eagerly anticipate the minutes of the Fed’s recent meeting scheduled for Thursday, alongside the release of Flash PMIs for the euro zone, Germany, the UK, and the US. Additionally, a lineup of Fed speakers, including Bostic, Barr, Waller, and Jefferson, is expected to provide further insights, potentially reinforcing the sentiment of prolonged monetary policy accommodation.
Elsewhere in currency markets, sterling hovered near its nearly two-month high of $1.2705, while the Australian dollar saw a modest increase to $0.6703, and the New Zealand dollar remained relatively stable at $0.61315.
As global economic conditions remain uncertain, market participants will closely monitor central bank communications and economic indicators for signals of future monetary policy direction.
