The U.S. dollar remained stable on Monday, trading within a narrow range as investors looked ahead to important events this week that could provide insight into future U.S. interest rate decisions.
The main focus is on the minutes from the Federal Reserve’s July meeting and a speech by Fed Chair Jerome Powell at Jackson Hole. These events are expected to be key drivers for currency markets. Additionally, inflation data from Canada and Japan, as well as Purchasing Managers’ Index (PMI) readings from the U.S., eurozone, and UK, will also be closely watched.
In early trading, the euro was at $1.1026, while the British pound reached a one-month high of $1.2950. The U.S. dollar index, which measures the dollar against a basket of currencies, dipped slightly by 0.06% to 102.40.
Investors are already betting on a possible rate cut by the Fed in September, with a 25-basis-point cut fully priced in and a 24.5% chance of a 50-basis-point cut. Futures suggest over 90 basis points of easing by the end of the year.
Currency strategist Carol Kong from Commonwealth Bank of Australia noted that markets will be paying close attention to Powell’s comments at the end of the week. She believes Powell might hint at a rate cut in September but will likely keep options open due to upcoming economic data.
Earlier this month, markets were volatile after weaker-than-expected U.S. economic data, particularly a soft jobs report for July. This had sparked fears of a recession and concerns that the Fed was slow to lower rates. However, with those worries easing, safe-haven assets like the yen have lost some of their recent gains.
The Japanese yen was down 0.2%, trading at 147.93 per dollar, after falling about 4% from its peak earlier in the month. The New Zealand dollar rose 0.16% to $0.6062, and the Australian dollar reached a one-month high of $0.66865. The Australian dollar has been supported by the Reserve Bank of Australia’s continued hawkish stance, with Governor Michele Bullock saying it’s too early to consider rate cuts.
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