Investing.com – The U.S. dollar is falling slightly from a recently reached one-year high at the start of a week that says little about key economic data but does feature commentary from a series of Fed speakers.
At 04:50 ET (09:50 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 106.497, just below the one-year high of 106.72.
The index climbed 1.6% last week, marking six weeks of gains in the last seven weeks.
The dollar retains its strength
The dollar has benefited from a structural bullish shift since the election of Donald Trump at the beginning of the month, and the macro story has not really raised any doubts.
“Inflation rates are higher than the Federal Reserve target would tolerate, and Chairman Jerome Powell added a note of caution about future easing in a speech last week,” ING analysts said in a note.
“With very little additional information on the US economy being added this week, the market-implied policy difference between the Fed and most other G10 central banks could mean that any positioning correction will be short-lived.”
There are at least seven Fed speakers scheduled this week, starting later Monday with Chicago Fed President. Although widely regarded as a dove, most officials are expected to be cautious about aggressive cuts.
Futures imply a 60% chance that the Fed will ease by a quarter point in December and only 77 basis points of cuts are priced in at the end of 2025, compared to more than 100 basis points a few weeks ago.
Euro rate lower
In Europe, it traded 0.3% higher at 1.0568 ahead of speeches from a range of European Central Bank officials, including the president.
These speakers are likely to sound quite subdued even after preliminary figures for October, released last week, showed the bloc growing faster than market observers expected in the third quarter.
That said, the quarterly growth of 0.4% shows that the eurozone economy remains vulnerable, with its largest component – the German economy – particularly weak.
ECB officials will also have to consider the risk of tariffs hitting EU trade following the election of Donald Trump as US president.
The week ends with the release of the latest activity data for the Eurozone, which will be carefully studied by traders.
“PMIs have become increasingly important for the eurozone after the European Central Bank shifted its focus from inflation to growth and now takes into account a wider range of soft activity data,” ING said.
rose to 1.2622 ahead of the release of UK data for October on Wednesday.
Economists expect annual inflation to have risen by 2.2%, which would be up from 1.7% in September, the first time in more than three years that annual inflation has fallen below the target BoE of 2% fell.
The BoE made a second rate cut of 25 basis points earlier this month and said further cuts were likely to come gradually in the wake of the new UK government’s first budget.
Ueda refuses to announce a rate hike in December
rose 0.2% to 154.64 after the Bank of Japan governor reiterated that interest rates would continue to rise gradually, but made no mention of a possible rate hike in December.
The lack of clear guidance caused the yen to retreat after strengthening late last week after Japanese Finance Minister Katsunobu Kato warned of possible intervention if the yen falls too far and too fast.
rose 0.2% to 7.2416, just off a three-month high, with sentiment towards China weighed on by the prospect of high US trade tariffs against the country under the Trump administration.
