The U.S. dollar exhibited marginal weakness on Monday, settling after recent fluctuations as traders awaited crucial U.S. inflation data for insights into interest rate trends.
As of 04:00 ET (09:00 GMT), the Dollar Index, which measures the dollar against six other major currencies, edged down by just 0.1% to 105.090. This minor decline follows a week of gains, following two consecutive weeks of losses.
Anticipation Builds for Key Inflation Figures
Last week, the dollar experienced considerable volatility in response to mixed U.S. economic indicators, sparking speculation about the timing of potential interest rate adjustments by the Federal Reserve.
However, as a new week begins, market movements are expected to stabilize as traders await the release of the latest U.S. inflation data. Wednesday’s Consumer Price Index (CPI) report is anticipated to reveal a 3.6% increase in underlying inflation on a year-over-year basis, potentially marking the smallest rise in over three years.
A higher-than-expected inflation reading could diminish expectations for rate cuts throughout the year, thereby strengthening the dollar.
Analysts at ING noted, “After the dovish FOMC meeting and the soft April NFP sucked the momentum from the dollar’s upside, the question is whether price data can actively contribute to the dollar’s downside.”
Additional Insights Awaited
Aside from inflation data, investors are awaiting insights into the U.S. consumer’s health this week, with April retail sales figures scheduled for release on Wednesday. Furthermore, earnings reports from major retailers Walmart and Home Depot will provide further indications of economic trends.
Sterling Gains Momentum, Euro Holds Steady
In Europe, GBP/USD gained 0.1% to reach 1.2531, benefiting from last week’s strong GDP data indicating robust growth in Britain’s economy.
EUR/USD traded 0.1% higher at 1.0784, although this upward trend may be short-lived due to expectations of an upcoming rate cut by the European Central Bank (ECB).
Asian Markets React
USD/CNY rose 0.1% to 7.2339, reaching a two-week high, following mixed inflation signals from China over the weekend. While consumer price index inflation exceeded expectations, producer price index inflation continued to decline.
USD/JPY rose 0.1% to 155.87, remaining below the 156 level. Market attention remains focused on potential government intervention following previous instances earlier in May.
Overall, the dollar’s trajectory in the near term is likely to be influenced significantly by the upcoming inflation data and developments in major economies worldwide.