Title: Dollar Climbs as Investors Await Key U.S. Economic Data
Source: Originally published by Brigid Riley for Reuters via MSN
The U.S. dollar edged slightly higher in early trading on Monday, as market participants exercised caution in anticipation of several important U.S. economic reports that could influence the Federal Reserve’s upcoming decisions on interest rate policy.
Overview
The greenback saw modest gains alongside rising U.S. Treasury yields, while major counterparts like the euro and British pound showed subdued movement. The Japanese yen, meanwhile, continued its slide towards multi-decade lows, keeping currency traders attentive to potential intervention from Japan’s financial authorities.
The forex market’s direction this week will largely hinge on data from the United States, including updates on durable goods orders, consumer confidence, and inflation figures. These indicators will provide greater clarity on the health of the U.S. economy and may influence the trajectory of interest rates going forward.
U.S. Dollar Strengthens Slightly
– The U.S. dollar index, which tracks the currency against a basket of six major peers, rose 0.1 percent to reach 106.13.
– On Friday, the index had posted a 0.2 percent gain, following remarks from Federal Reserve Chair Jerome Powell suggesting the central bank would remain cautious before making any interest rate cuts.
– Powell stated that policy decisions would be driven by incoming data, reinforcing the importance of this week’s scheduled economic releases.
Key Data in Focus
Investors and analysts will be watching several economic reports due this week, which are likely to shape expectations for U.S. monetary policy:
1. Durable Goods Orders
– Set to be released on Tuesday, this report tracks new orders for long-lasting manufactured goods.
– It serves as a key indicator of manufacturing sector activity and investment trends.
– A strong reading may suggest resilience in business investment, potentially reinforcing the Fed’s case to maintain current rates.
2. Conference Board’s Consumer Confidence Index
– Also scheduled for Tuesday, this measures consumer sentiment and perception of current and future economic conditions.
– Confidence in spending power directly correlates with economic growth and inflation prospects.
– A surge in consumer confidence could suggest stronger inflationary pressures ahead.
3. Core Personal Consumption Expenditures (PCE) Index
– Due on Thursday, this is the Fed’s preferred inflation gauge.
– The index excludes volatile food and energy prices to give a clearer picture of underlying inflation trends.
– Any sign of rising inflation could delay expected interest rate reductions.
Mixed Signals From Federal Reserve Officials
Federal Reserve policymakers continue to underscore data dependency in their public statements, fueling uncertainty over when and how aggressively the Fed might cut interest rates.
– In recent weeks, several Fed officials, including Powell, have suggested that inflation is not falling as quickly or steadily as hoped.
– Despite revising previous expectations, some economists still believe the Fed may implement one or two rate cuts before the end of 2024, depending on inflation readings and labor market data.
Market Reactions and Projections
– Short-term U.S. Treasury yields climbed on Monday, with the two-year yield rising to 5.10 percent compared to Friday’s 5.04 percent close.
– Higher yields often lend support to the dollar, making U.S.-denominated assets more attractive to foreign investors.
– According to the CME FedWatch Tool, futures markets are currently pricing in about a 60 percent probability of a rate cut by September, down from more than 75 percent earlier this month.
Yen Depreciation Raises Risk of Intervention
The Japanese yen continued its downward spiral on Monday, pushing closer to levels last seen in 1990.
– The USD/JPY pair hovered near 149.91, inching toward the historically sensitive level of 150.
– Despite rising speculation about potential intervention by Japanese finance authorities, no direct action has been taken so far.
– Japanese Vice Finance Minister Masato
Read more on EUR/USD trading.