LONDON (Reuters) – As traders reassessed the likelihood of fast rate hikes, the U.S. dollar struggled against its major rivals on Monday, while the euro led gainers at the start of the European Central Bank’s annual conference in Portugal.
The dollar has strengthened in recent days, with an index reaching a near two-decade high of 105.79 earlier this month as a result. Investors are becoming pessimistic about the economy’s future as a result of various high-frequency data indicators indicating a slowdown in growth.
In a note, strategists at Mizuho stated, “The sharp rise in inflation expectations has led to a record low in consumer confidence, which will strengthen fears of a sharper recession in the U.S. economy in the future.”
At 103.86, the dollar was 0.2% weaker against its competitors. Earlier this month, it reached a late-2002 high of 105.79, which occurred in December 2002.
In recent days, this source of dollar support has diminished.
Futures pricing indicates that traders now anticipate the U.S. Federal Reserve’s benchmark funds rate to stabilise at 3.5 percent beginning in March of next year, a reversal from prior expectations that the rate would surge to over 4 percent in 2023.
As the annual symposium of the European Central Bank kicked off in Sintra, Portugal, with ECB President Christine Lagarde and Federal Reserve Chair Jerome Powell in attendance, the euro outperformed the dollar. The markets will closely monitor any indications of potential policy changes.
The single currency increased by 0.2% to $1.0580.
Despite the optimistic tone on global markets, commodity currencies came under pressure on Monday as statistics indicated China’s industrial businesses’ profits fell again in May, albeit at a slower rate than in April.
The Russian rouble declined in the interbank market as Russia approached its first sovereign default since the Bolshevik Revolution.
The largest cryptocurrency in the world, Bitcoin, increased by 1.4% to $21,170.88, after plunging to $17,588.88 earlier in the month.
