The U.S. dollar rose on Monday, in quiet trading as traders awaited the release of key inflation data later in the week for clues on the Federal Reserve’s future monetary policy decisions.
The dollar index is now at the opening of the US market for the week at 103.06 against a basket of foreign currencies with sideways movement during the Asian and European session. The dollar index has repelled only 0.1% so far. The USDJPY is rising to 147.75 yen per dollar.
At the same time, gold prices are rising by almost a full point, as spot gold contracts are trading at 2452.6, up 0.87%, and yellow metal futures are rising by 0.75% to $2491.5.
Dollar rises at the start of inflation week
The dollar received a boost late last week after stronger-than-expected weekly data on jobs in the U.S. led traders to reduce bets on a Fed rate cut this year.
The U.S. dollar suffered at the start of the week, driven by concerns about the U.S. economy and Bank Japan tightening.
Federal Reserve fund futures point to a 49% chance of cutting interest rates by half a percentage point in September, after rising to 100% sometime last week.
This uncertainty leaves markets highly vulnerable to data and events, with the US consumer price index looming particularly on Wednesday.
July CPI data is expected to show that inflation continued to approach the Federal Reserve’s annual target of 2%, with annual core inflation expected to decline to 3.2%, the lowest level since April 2021.
As analysts at ING said in a note: “Will the PPI data for July (Tuesday) and CPI data (Wednesday) continue to provide confidence to the Federal Reserve that inflation is under control and allow the easing cycle to begin in September? Most think the answer to this question is yes.’
GBP awaits inflation data
In Europe, the EUR/USD currency pair rose to 1.0920, not far from last week’s peak of 1.1009, the highest level for the pair since January 2.
The pair had quiet trading at the start of the week, as the Eurozone data calendar was very quiet this week, and there weren’t many ECB speakers scheduled to speak on the matter.
This market is left to focus on the first revision of Eurozone GDP data for the second quarter.
The ECB began cutting interest rates in June, and many expect policymakers to agree to another cut in September.
The GBP/USD forex pair was unchanged at 1.2759 at the start of Britain’s busy economic data calendar this week, as investors look for clues on whether the Bank of England will continue its rate cut cycle next month.
The Bank of England cut interest rates for the first time since 2020 at the beginning of this month, and markets now expect a 33% probability of another quarter-point cut at the September meeting.
Wage growth data is due on Tuesday, followed a day later by inflation figures, which will be closely watched for signs of continued
Read also:The Japanese yen starts the week in negative territory
Yen Falls and Fears Return
In Asia, the USD/JPY pair rose 0.7% to 147.78, down more from the significant rally seen last month.
Anticipation of economic readings and central bank meetings across Asia kept traders on edge, while the Japanese holiday drained trading volumes.
USD/RMB rose 0.2% to 7.1811, with the yuan slowly weakening.
While large losses in the yuan have been halted by continued support from the People’s Bank of China, doubts about the Chinese economy have mostly kept traders on the currency sale.
This week’s focus is on China’s industrial production and retail sales data, for more clues about the country’s biggest economic drivers.
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