Key Points:
The U.S. dollar edged higher on Monday as traders anticipated U.S. inflation data and a series of speeches from Federal Reserve officials, both of which could shape the trajectory of interest rates.
In Asia, the yuan struggled to recover after Beijing’s recent stimulus measures failed to inspire confidence, highlighting persistent economic concerns. Meanwhile, the Australian and New Zealand dollars faced declines due to their countries’ reliance on Chinese demand.
The dollar’s recent strength has been bolstered by expectations that upcoming U.S. inflation data may reinforce the case for a restrained pace of Federal Reserve rate cuts.
The dollar index closed at 104.955, close to its recent high of 105.085. Traders are now looking ahead to Thursday’s U.S. consumer price data, with an eye on the core inflation reading.
Picture: The USDX is in a steady uptrend, supported by moving averages and mild MACD bullishness, facing resistance at 105.085, as seen on the VT Markets app.
Should it exceed the 0.3% forecast, it would reduce the likelihood of a December rate cut, supporting the dollar.
In parallel, a range of Federal Reserve officials are scheduled to speak this week, including Chair Jerome Powell on Thursday.
Market participants will scrutinise these comments for any clues about the Fed’s rate path, particularly as JPMorgan economist Michael Feroli notes the expectation of only one further rate cut per quarter after December.
With the Fed potentially nearing a terminal rate of 3.5%, the dollar’s long-term outlook remains positive.
This week promises to be eventful for currency markets, with several data releases and speeches that could influence the dollar’s trajectory.
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With the dollar standing firm amid U.S. economic resilience and policy clarity, and the euro and yen weighed down by political and economic concerns, the dollar appears well-positioned for continued strength.
The week’s data and Fed commentary will be pivotal in shaping sentiment, as traders brace for potential shifts in the global economic landscape.
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