| 3 March 2024, Sunday |

Dollar climbs ahead of busy week for central banks

At the beginning of a week full with data releases and central bank rate setting meetings, including those by the Bank of England and the Federal Reserve, the dollar increased on Monday, reclaiming some of the territory it had lost earlier in the month.

The immediate term attention was on the flash GDP and inflation figures for the euro zone as well as the specifics of the Japanese Ministry of Finance’s involvement, both of which were due later on Monday.

The dollar increased 0.57% versus the Japanese yen to 148.2, the euro fell 0.5% to $0.9919, and sterling fell 0.56% to $1.1549 as the currency’s earlier-in-the-month weakness persisted.

On rising predictions that the U.S. Federal Reserve will announce a less aggressive future programme of rate hikes at its policy meeting that begins on Tuesday, the dollar is headed for a monthly loss in October — its first since May and only the second this year.

However, this story lost its momentum by the end of last week, and it still had trouble on Monday. “The markets have been hinting at a Fed monetary policy reversal. Given how resilient the economy has been and in particular how high inflation has been, I believe it is premature “the Commonwealth Bank of Australia’s Carol Kong, a currency strategist (CBA).

Some slowing of rate hiking is also already in the price, and so MUFG analysts said “the Fed would have to send a clear signal that it plans to slow rate hikes and sound more cautious over the need for further tightening to trigger a further leg lower for the U.S. dollar in the week ahead.”

The Fed is expected to deliver another 75 basis point (bp) rate hike after the conclusion of the FOMC meeting on Wednesday.

As for Monday, investors were waiting for euro zone flash GDP and CPI data due at 1000 GMT after the European Central Bank last week raised rates by 75-bps as it continues to try to rein in red hot inflation.

  • Reuters