By Peter Nurse – The U.S. dollar edged lower in early European trading on Monday, with limited activity ahead of the release of key U.S. consumer inflation data as well as a major European Central Bank meeting.

As of 3 a.m. ET (0700 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading down 0.1% at 102.025.

The index gained around 0.5% last week after Friday’s US jobs report showed employers added 390,000 jobs in May, more than expected, bolstering expectations. that the US Federal Reserve will remain aggressive in the fight against inflation.

Attention this week will focus on the US consumer price index for May, which is due out on Friday.

A high inflation reading would add to expectations of aggressive tightening from the US Federal Reserve and likely end speculation last month that the Fed would pause interest rate hikes during its September meeting.

That said, core inflation, which excludes energy and fuel price volatility and is the Fed’s preferred gauge, is expected to come in at 5.9% year-over-year. another, down from 6.2% the previous month. This would mark a third month of consecutive declines and demonstrate that underlying inflation may have peaked.

Also of note this week is Thursday’s meeting of the European Central Bank, which is expected to set the stage for an interest rate hike at its July meeting, particularly after recent data showed that inflation consumption in the euro zone accelerated in May to reach a new record high of 8.1. %.

“The pressure for the ECB to act has increased significantly, but previous central bank guidance rules out a rate hike at the meeting. [this week]“, Nordea analysts said, in a note. “With updated inflation forecasts, signals from the ECB will virtually guarantee a rate hike in July.”

EUR/USD rose 0.1% to 1.0726, GBP/USD rose 0.3% to 1.2528, while USD/JPY fell 0.2% to 130, 54, but remains close to last month’s 20-year high at 131.34.

Risk-sensitive AUD/USD edged lower to 0.7204 ahead of Tuesday’s Reserve Bank of Australia meeting, which is expected to lead to a 25bps rate hike as the central bank tightens its grip. policy to fight inflation.

USD/CNY fell 0.1% to 6.6541 after China’s Caixin services purchasing managers’ index rose to 41.4 in May from 36.2 in April, suggesting a slow recovery for the world’s second largest economy as the country eases its COVID-19 restrictions in cities like Shanghai.

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