Home ForexArticles Dollar falls ahead of key data; ECB meeting looming By Investing.com

Dollar falls ahead of key data; ECB meeting looming By Investing.com

by SuperiorInvest

© Reuters.

Investing.com – The U.S. dollar fell in early European trading Monday, at the start of a week that includes key data on U.S. growth and inflation, as well as the first major central bank meetings in the U.S. new Year.

At 04:00 ET (0900 GMT), the dollar index, which tracks the dollar against a basket of six other currencies, was trading 0.1% lower at 102.984, retreating from recent highs of a month.

The dollar falls pending key data

The dollar ended last week higher as signs of resilience in the U.S. economy led traders to curb expectations of early interest rate cuts by the Federal Reserve.

However, the new week has begun with traders banking some profits ahead of the release later in the week of fourth-quarter growth figures, as well as a key US inflation reading.

The government is scheduled to release fourth-quarter data on Thursday, which is expected to be 2.0% after a 4.9% increase in the previous quarter.

“Our macro team forecasts above-consensus Q4 GDP,” ING analysts said in a note. “This could cause the market to further reduce expectations for Fed easing expectations this year. “Currently, the market attributes a 43% chance of a cut in March and an easing cycle this year that is now worth 115 basis points.”

Data for December will also be published on Thursday, and comes after a 2.6% rise in the 12 months to November and monthly prices fell for the first time in more than three and a half years.

The ECB meeting is approaching

In Europe, it traded virtually unchanged at 1.0896 as attention turns to the European Central Bank’s policy-setting meeting on Thursday.

It is certain to keep rates steady, having halted hikes in October, but investors will carefully study President Christine Lagarde’s associated comments as they look for interest rate cuts later this year.

Traders currently expect cuts to possibly begin in April, but are likely to continue to signal that it is too early to discuss rate cuts, especially since she, along with several of her colleagues, have consistently downplayed expectations for early rate cuts. .

“Our baseline view sees EUR/USD hovering around these 1.09 levels as the ECB attempts to reposition itself for a data-dependent approach to its future policy,” ING added.

Preliminary readings for the eurozone are released on Wednesday and are expected to show that business activity remains in contraction territory.

traded virtually unchanged at 1.2700, with sterling remaining supported despite Friday’s weak release.

The UK unexpectedly accelerated in December, data released last week showed, implying the central bank will take longer to cut rates than its peers.

BOJ meeting in focus

In Asia, it fell to 148.12, as traders cautiously awaited the conclusion of an overnight meeting, where the central bank is widely expected to maintain negative interest rates and its yield curve control mechanisms.

The devastating earthquake earlier this year is expected to join weakening inflation and slow wage growth as reasons why the Bank of Japan will maintain its ultra-loose monetary policy, at least for now.

was trading slightly higher at 7.1956, after the People’s Bank of China kept its benchmark index at record lows on Sunday.

The central bank has limited room to further ease policy as it struggles to strike a balance between supporting an economic recovery and avoiding further yuan weakness.

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