Investing.com – The U.S. dollar rose Monday, holding on to recent gains as traders digested more stimulus announcements from China ahead of comments from some Federal Reserve officials.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 102.817, just below last week’s peak, which was the highest since mid-August.
Dollar Looks at Fed Speakers, Retail Sales
The dollar got a boost as traders cut bets on further outsized interest rate cuts by the Federal Reserve at its remaining meetings this year, following the strong payrolls report and a rise in the consumer price index.
Markets will get another update on the health of the US consumer on Thursday, with investors hoping the data will provide more insight into an economy that is proving to be much more resilient than many expected.
Before that, investors will also get a chance to hear from a handful of Fed officials in the coming days. Fed Governor Minneapolis President is expected to speak later on Monday, and there is strong interest in what they might say about the central bank’s interest rate outlook.
“We have a few Fed speakers this week who could reinforce the idea of two 25bp Fed cuts this year – which could be very slightly negative for the dollar given current market prices,” ING analysts said.
The euro continues to fall ahead of the ECB meeting
In Europe, it traded 0.1% lower at 1.0928 ahead of Thursday’s policy-setting meeting by the , which is expected to result in another 25 basis point cut.
Business activity in the eurozone shrank unexpectedly in September, while inflation fell below the ECB’s 2% target. Data suggesting the eurozone economy is in worse shape than when policymakers last met.
“If the ECB does not cut spending in October, the market will think the central bank is behind the curve and may be making a policy mistake,” said Mark Wall, chief economist at Deutsche Bank.
fell to 1.3062, at the start of a big week for UK economic data.
“This week’s release of UK jobs and especially inflation data on Wednesday could have a significant impact on the pricing of the Bank of England’s easing cycle and sterling,” ING said.
The UK economy returned to growth in August after two straight months of no growth, but September figures are expected to fall to 1.9% annualized, below the Bank of England’s medium-term target.
BoE Governor Andrew Bailey has said the Bank could become “a little more activist” if inflation data allows, and a drop of this magnitude (from 2.2% in August) could make that possible this week, ING added to it.
The yuan is slipping on deflation concerns
rose 0.2% to 7.0795, with the yuan hit by data showing China’s growth in September was weaker than expected, while it contracted for the 23rd month in a row.
Sentiment towards China was also affected by mixed signals on fiscal stimulus.
The Treasury Department said in a weekend briefing that it planned to provide fiscal support, including more debt issuance and aid to provincial governments.
But the briefing left out key details about the planned measures, particularly their scope and timing, leading to limited optimism about more stimulus.
rose 0.2% to 149.44, with the yen weakening slightly on lingering doubts about the Bank of Japan’s ability to raise rates further, although a Japanese holiday has limited activity.
