The dollar remained steady on Monday as investors awaited further indications on the U.S. interest rate trajectory following cautious remarks from Federal Reserve officials, despite signs of cooling inflation.
The Japanese yen began the week slightly weaker, trading at 155.80 per dollar, with traders anxiously watching for potential government intervention. The yen has traded within narrow ranges over the past few days.
Recent data showed that U.S. consumer prices eased in April, prompting markets to price in 50 basis points (bps) or at least two rate cuts this year. However, several Fed officials have expressed caution regarding the timing of potential rate decreases. Consequently, traders are anticipating approximately 46 bps of easing this year, with only a rate cut in November fully priced in.
On Monday, the euro rose by 0.07% to $1.087525 in early trading, approaching the nearly two-month high of $1.0895 reached last week. The dollar index, which measures the U.S. currency against six other major currencies, remained steady at 104.46.
Attention is now turning to the Personal Consumption Expenditures (PCE) price index report, the Fed's preferred measure of inflation, due on May 31.
"The Fed will not have enough data by the June or July meetings to be confident enough to cut rates," said Brian Jacobsen, chief economist at Annex Wealth Management. "Come August, (Fed) Chair Powell could use the Jackson Hole conference to explain their thinking about the path ahead, potentially setting up a September cut. We can only hope the data supports this."
Markets will also focus on the minutes of the Fed's last meeting, which are due on Thursday. This week also features flash PMIs for the eurozone, Germany, the UK, and the U.S., along with numerous Fed speakers.
"We have Bostic, Barr, Waller, and Jefferson all speaking today (Monday). More 'higher for longer' commentary seems likely," ING economists noted.
In other currencies, sterling was last at $1.2705, just below the nearly two-month high it reached on Friday. The Australian dollar was up 0.14% at $0.6703, while the New Zealand dollar remained steady at $0.61315.
Paraphrasing text from "Reuters" all rights reserved by the original author.
