Investing.com – The U.S. dollar edged higher in quiet trading on Monday, with traders looking to the release of key inflation data later in the week for clues about future Federal Reserve monetary policy decisions.
At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 103.017, stabilizing after last week’s wild swings.
The dollar is rising higher than the CPI
The dollar got a boost late last week after stronger-than-expected weekly data led traders to lower their expectations for Federal Reserve rate cuts this year.
The dollar had struggled early this week, driven by concerns about the US economy and the hawkish stance of the Bank of Japan.
Fed funds futures imply a 49% chance of a half-point rate cut in September, after rising as high as 100% at one point last week.
This uncertainty makes the markets very vulnerable to figures and events, with the US consumer price index threatening to become particularly high on Wednesday.
July data is expected to show inflation remaining closer to the Fed’s annual target of 2%, with forecasts calling annual core inflation down a touch to 3.2%, the lowest level since April 2021.
“Will the July PPI data (Tuesday) and CPI data (Wednesday) continue to give the Fed confidence that inflation is under control and allow the easing cycle to begin in September? Most think the answer to that question is yes,” ING analysts said in a note.
Pound sterling awaits inflation data
In Europe, the price rose to 1.0920, not far from last week’s peak of 1.1009, the highest level for the pair since January 2.
The pair saw quiet trading early this week, while the Eurozone data calendar was very quiet this week with few European Central Bank speakers scheduled.
This allows the market to focus on the first revision of Eurozone GDP data for the second quarter.
They started cutting interest rates in June, and many expect policymakers to agree to another cut in September.
traded flat at 1.2759 at the start of a busy UK economic data calendar this week, as investors look for clues as to whether the Bank of England will continue its rate-cutting cycle next month.
The BoE cut rates early this month for the first time since 2020 and markets currently estimate a roughly 33% chance of another quarter-point cut at the September meeting.
Wage growth data will be released on Tuesday, followed a day later by figures, which will be closely watched for evidence of continued price pressure.
The yen is falling
In Asia, yields rose 0.4% to 147.25, retreating further after a stellar rally last month.
Anticipation of economic data and central bank meetings from across Asia kept traders on edge, while a Japanese holiday deflated volumes.
climbed 0.2% to 7.1811, with the yuan slowly retreating.
While big losses in the yuan have come amid continued support from the People’s Bank, skepticism about China’s economy has left traders often short of the currency.
The focus this week is on China and data, for more clues about the country’s biggest economic engines.
