The U.S. dollar exhibited a resurgence during early European trading on Monday, rebounding from its previous losses sustained following Friday’s payrolls data release. This rebound comes ahead of the imminent unveiling of inflation data from the two largest economies globally.
At 03:05 ET (07:05 GMT), the Dollar Index, which gauges the dollar’s performance against a basket of six major currencies, advanced by 0.2%, reaching 102.082, a recovery from its nadir of 101.73 recorded on Friday.
Dollar Bounces Back in Anticipation of Significant Inflation Metrics
The U.S. economy reported a lower-than-anticipated addition of jobs in July, as indicated by Friday’s data. This outcome resulted in the dollar descending to a one-week trough against a spectrum of currencies.
Nevertheless, the jobs report concurrently revealed robust wage increments and a dip in the unemployment rate, signaling the preservation of a taut labor market and persisting inflationary pressures.
Considering the Federal Reserve’s evident scrutiny of incoming data in the lead-up to the September policy meeting, market focus is now centered on Thursday’s release of U.S. inflation data, with expectations of offering valuable guidance.
In the event of subdued figures, the likelihood of the Fed’s policymakers deferring any interest rate hikes during their upcoming September meeting, subsequent to last month’s quarter-percentage-point increment, would be augmented. Nonetheless, projections anticipate that core inflation might have escalated by 4.7% on an annual basis in July.
Yuan Displays Vulnerability Amidst Deflation Apprehensions
USD/CNY advanced by 0.7%, reaching 7.1923, with the yuan demonstrating vulnerability ahead of the Chinese inflation data release scheduled for Tuesday. Forecasts indicate a 0.5% annual contraction in consumer inflation for July, accompanied by further projected contraction in producer inflation.
Markets are also closely attuned to cues from the Chinese government regarding its intended strategies to stimulate economic growth, particularly following officials’ limited divulgence of specifics about their proposed expenditure measures.
German Industrial Production Plummets
EUR/USD experienced a 0.3% decline, reaching 1.0979, subsequent to the release of data indicating a 1.5% decline in German industrial production for the month of June. This significant contraction was a marked contrast to the revised 0.1% dip observed in the preceding month.
Despite the European Central Bank’s interest rate hike earlier in the month, signs of continued challenges within the German economy, which stands as the eurozone’s largest, might compel ECB policymakers to contemplate halting their tightening trajectory come September.
U.K. House Prices Encounter Further Decline
GBP/USD retreated by 0.2% to 1.2724 after mortgage lender Halifax unveiled data illustrating a fourth consecutive month of dwindling British house prices. This manifested as a 0.3% reduction from June’s figures, with a year-on-year contraction of 2.4%.
The United Kingdom is slated to release second-quarter GDP data on Friday, which is projected to marginally ascend, indicative of the broader economy’s near-stagnant state.
In other developments, USD/JPY ascended by 0.4%, reaching 142.34, notwithstanding warnings from certain Bank of Japan members about the potential for inflation to surpass expectations during the current year.