US dollar holds steady as markets await key inflation data
The dollar held steady against major currencies on Monday as investors awaited key US inflation data this week, which will influence the possibility of interest rate cuts later in 2024, as reported by Reuters.
The dollar has maintained its strength against the yen at ¥155.80, after touching a high of ¥155.965, its strongest level since May 2nd.
The dollar has rebounded against the yen following a three per cent decline earlier in the month, which was its largest weekly drop since December 2022, amid suspected interventions.
The euro remained stable at $1.07695 ahead of the euro zone’s upcoming inflation data release on Friday, as the Sterling held steady at $1.2522.
China’s offshore yuan dropped 0.1 per cent to 7.2414, and the onshore yuan hit a low of 7.2385, awaiting news on new US tariffs on China.
Chinese central bank data revealed lower-than-expected new bank lending in April and record-low broad credit growth. Consumer prices in China increased in April, while producer prices continued to decline.
Recent weeks have seen rising expectations for rate reductions, fuelled by a weaker-than-expected US jobs report in April and dovish signals from the Federal Reserve.
Markets currently predict a 61.2 per cent chance of rate cuts starting in September, with a total reduction of 50 basis points anticipated.
However, comments from Fed officials last week were mixed, with some questioning whether current rates are high enough.
Additionally, a recent survey revealed a jump in consumer inflation expectations, potentially complicating the Fed’s decision.
This week is critical, with the producer price index (PPI) scheduled for release on Tuesday, followed by the consumer price index (CPI) on Wednesday.
Incoming data needs to point towards disinflation, not just isolated areas of weakness, stated Matt Simpson, a senior market analyst at City Index.
Higher inflation this month would erase the impact of softer growth and weaker employment figures, Simpson added.
