The U.S. dollar traded lower on Monday ahead of the release of the minutes of the Federal Reserve’s July meeting and Federal Reserve Chairman Jerome Powell’s highly anticipated speech in Jackson Hole later this week.
At 13:53 Riyadh time, the dollar index, which measures the greenback against a basket of six other currencies, was trading down 0.25% at 102.057.
The dollar’s bearish momentum is building
The minutes of the meeting are due to be announced on Wednesday, and Powell’s talk report on Friday is likely to be the main driver of the currency’s movement for the week, and traders expect a pessimistic tone.
Analysts at ING said in a note that “the signals are subtle, but the bearish momentum of the dollar is starting to build.” The DXY Dollar Index is now falling across its early August lows. This week’s events such as the minutes of the July FOMC meeting, job reviews, and Fed speakers could add to the dollar’s losses. Investors may also want to know how far they can drag the dollar to September lows.”
The Fed has maintained its benchmark overnight interest rate in the current range of 5.25%-5.50% since last July, after raising the rate by 525 basis points since 2022.
Traders fully priced the interest rate by the Federal Reserve at 25 basis points in September, with a 24.5% probability of a move of 50 basis points.
Sterling rises to one-month highs
In Europe, GBP/USD rose 0.2% to 1.2963, rising to one-month highs on the dollar’s weakness.
“The GBP/USD pair appears poised to retest this year’s high of 1.3045 as broad dollar weakness dominates global forex markets,” analysts at ING said. We thought that the Bank of England’s tightening might keep sterling gains under control. Bank of England Governor Andrew Bailey will speak at the Jackson Hole symposium on Friday.
“What we might underestimate, however, is the demand for the next pound sterling through M&A activity. This year, the UK is the target area for deals worth more than US$200 billion.’
The euro/USD rose 0.1% to 1.1037, approaching a more than seven-month high last week.
ING analysts added: “If the EURUSD forex pair starts trading across the 1.11 level, we will not underestimate its ability to follow since the volatility achieved has been very low and for a long time.”
Yen Rising
In Asia, the JPY pair fell 1% to 146.05, with a significant decline due to the dollar’s widespread weakness, along with the potential for further divergence in policy between the US and Japan.
Bank Japan Governor Kazuo Ueda is due to appear in parliament on Friday, where he is expected to discuss the central bank’s decision last month to raise interest rates.
The Chinese yuan currency pair fell 0.3% to 7.1408, with the yuan heading for its biggest gain in two weeks, benefiting from a widespread sell-off in the dollar as investors bet on a cut in U.S. interest rates.
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