The US dollar edged lower in early European trade Monday, but it remained elevated after a strong run of US economic data and ahead of the release of Federal Reserve meeting minutes.
The Dollar Index, which tracks the greenback against a basket of six other currencies, was 0.1% lower at 103.715 at 03:05 ET (08:05 GMT), but it is still up nearly 2% for the month, putting it on track for its first monthly gain since last September.
With the United States on holiday for Presidents’ Day on Monday, trading activity is likely to be muted, but the dollar has gained recently from statistics suggesting that the world’s largest economy has remained strong despite increased interest rates.
Retail sales were strong, initial jobless claims surprisingly declined last week, and inflation has remained stubborn, raising concerns that the US Federal Reserve may have to raise interest rates sooner than originally anticipated.
Also, a number of Fed speakers have indicated hawkish views on interest rates, bolstering the dollar.
This week’s focus will be on the release of the minutes from the Federal Reserve’s January meeting, when it reduced the pace of interest rate hikes to 25 basis points after a year of greater increases.
The surge in global tensions has also helped the safe haven dollar, with Beijing and Washington at odds over the alleged Chinese spy balloon and prospective aid to Russia, while North Korea allegedly launched three ballistic missiles off its east coast on Monday.
In other news, the EUR/USD climbed 0.1% to 1.0702, despite European Central Bank policymakers, notably President Christine Lagarde, stressing their concerns over persistent underlying inflation in light of the dollar’s rise.
Eurozone consumer confidence data for February are due later in the session, but most eyes will be on Tuesday’s flash PMI data for February, followed by the region’s final inflation figures for January on Thursday, which will be scrutinised after delayed German data was omitted from the first estimate.
GBP/USD climbed 0.1% to 1.2052, while USD/JPY lost 0.1% to 134.04, with Kazuo Ueda, the government’s nominee for BOJ governor, scheduled to testify on Friday, shedding additional light on the destiny of the Japanese central bank’s dovish yield curve management strategy.
The AUD/USD jumped 0.4% to 0.6909, while the NZD/USD nudged up to 0.6246, while the USD/CNY dipped 0.1% to 6.8590 as the People’s Bank of China kept its benchmark lending rates steady for the sixth month in a row.
