Investing.com – The US dollar rose in early European trading on Monday, helped by a safe-haven bid as tensions rise in the Middle East, while sterling retreats ahead of the Bank of America’s policy-setting meeting This week’s England.
At 04:50 ET (08:50 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 104.247.
Dollar rises ahead of Fed meeting
The safe-haven dollar found some support on Monday in the wake of last weekend’s deadly rocket attack on the Israeli-occupied Golan Heights.
The attack reportedly killed at least 12 people, with both Israel and the US blaming the attack on Iran-backed Hezbollah, which has denied responsibility for the attack.
Israel has vowed retaliation against Hezbollah in Lebanon, and Israeli fighter jets struck targets in southern Lebanon on Sunday.
However, the gain is small and most attention is focused on the meeting, which ends on Wednesday.
While the US central bank is widely expected to leave interest rates unchanged this week, the prospect of a first rate cut has become more likely, according to economists at Goldman Sachs.
The main factor moving the FOMC closer to a cut is the favorable inflation data from May and June. After firmer inflation data in the first quarter – largely due to residual seasonality and typical monthly noise – there was a significant improvement in inflation news in the second quarter.
Sterling slides; tariff decision in sight
In Europe, it traded 0.5% lower at 1.2809 ahead of Thursday’s meeting.
The likelihood that the central bank will start a rate-cutting cycle this week is largely seen as a coin toss, with policymakers having to judge between higher-than-expected services price inflation and weak growth.
fell 0.2% to 1.0836, with the euro weighed on by the likelihood of further rate cuts this year, following the June cut.
“Some important figures from the eurozone will also be released this week,” ING analysts wrote in a note. “Tomorrow’s second quarter GDP report is expected to show still tepid 0.5% annual growth, but it will be Wednesday’s flash CPI estimate that should have a bigger impact on the market . The latest meeting of the European Central Bank has placed more emphasis on data dependence, as President Christine Lagarde has dropped the forward guidance.”
BOJ meeting looms
In Asia, it rose marginally to 153.75, with the pair close to its lowest level in almost three months, ahead of the meeting later this week.
Analysts are divided on whether the central bank will raise interest rates by 10 basis points or hold them steady, while the BOJ will also provide more details on how it plans to taper its asset purchases.
rose 0.1% to 7.2584 after suspected government intervention led to wild swings in the yuan last week.
