A reassessment of the Federal Reserve’s tightening strategy led to lower US dollar values on Monday, particularly against the Japanese yen.
The dollar index, which tracks the greenback against a basket of six other currencies, was trading at 105.535 in the early hours of this morning, down 0.2 percent from its previous low of 105.490.
Personal consumption expenditure prices rose at their quickest pace since 2005, while the University of Michigan’s final inflation report showed a decline in consumers’ expectations of rising prices.
As a result of this impression, the Federal Reserve appears to have completed its tightening of monetary policy, with the economy now beginning to suffer the effects of a steep rise in interest rates.
This week’s economic attention will be on Friday’s monthly US jobs report, which is projected to show that 250,000 jobs were created in July, down from the previous month’s 372,000.
In a note, analysts at ING said “a heightened sensitivity of rate expectations and the dollar to data points” could be expected in the coming weeks, according to analysts at ING. Dollar-cross volatility is anticipated to remain high in the near future because of this.
At 132.12, the USD/JPY exchange rate declined by 0.8% from earlier in the session’s six-week low, with the Japanese yen taking advantage of reduced expectations for future interest rates in the United States. Because of this, Treasury yields have fallen and the yield differential between the United States and Japan has narrowed to its narrowest point in 24 years.
Other than that, the EUR/USD climbed 0.1% to 1.0230, benefiting from the weakening dollar, but the gains are tepid after German retail sales fell at their steepest annual rate in decades in June.
Destatis began accumulating data on pan-German retail sales in 1994 and saw its sales drop by 8.8% year over year. Month over month, sales declined by 1.6 percent as inflation ate away at customers’ purchasing power.
Prior to Thursday’s meeting of the Bank of England, the GBP/USD rate climbed 0.2 percent to 1.2195, with increasing expectations of a half-point rate increase to tackle rising inflation.
It climbed by 0.4% to 0.7010 after hitting a six-week high of 0.7032 the previous session, and the Australian Reserve Bank is expected to raise interest rates by another half-point on Tuesday.
Following a private poll by Caixin on Monday that showed factory activity growing more slowly than predicted in July, compared to the official survey on Sunday, the USD/CNY strengthened 0.1 percent.
