US dollar remains steady

22 May 2024 , 01:52 PM

US dollar remained steady in early trading on Wednesday, 22nd May, 2024.

As traders awaited the Reserve Bank of New Zealand’s monetary policy decision, the New Zealand Dollar continued to rise.

This week’s economic data didn’t offer much to move the market, so the main currencies stayed inside a narrow range.

Following a more moderate assessment of inflation last week that raised expectations for U.S. rate cuts this year, investors have been increasing their bets on rate cuts.

After several Federal Reserve officials expressed caution, markets priced in roughly 43 basis points (bps) of easing, down from the 52 bps peak last week.

Fed Governor Christopher Waller stated overnight that before he would feel comfortable backing a loosening of monetary policy, he would need to see many more months of strong inflation statistics.

Cleveland Fed President Loretta Mester echoed that timeline.

The PCE data, which is scheduled for release on May 31, will be a critical test for validating market predictions that U.S. inflation will continue to decline, he continued.

Against a basket of currencies, the dollar index held steady at 104.61, having spiked up to 104.76 over night.

The Fed’s April 30-May 1 monetary policy meeting minutes will be released to the market ahead of next week’s data, and investors will be closely examining them to gain additional insight into the central bank’s outlook.

Rate rises were ruled out by Fed Chair Jerome Powell in his press briefing following the Fed’s decision to hold rates constant at that meeting.

With attention on Thursday’s data from the euro zone Purchasing Managers’ Index and the European Central Bank’s negotiated wage tracker, the euro was up 0.04% at $1.0858.

Ahead of a crucial UK inflation report that was scheduled for release later in the day, the value of sterling was last trading at $1.2713, up 0.05% for the day and not far off a two-month peak set on Tuesday.

The dollar stayed steady at 156.20 against the yen as traders took a break from speculating on the currency pair.

Even following several rounds of intervention earlier this month, traders remained on edge due to fears of further currency intervention by Tokyo.

Following statistics showing Japan’s exports increased 8.3% in April compared to the same month last year, the yen remained stable.

The RBNZ is anticipated to maintain its benchmark cash rate at 5.5% during Asian trading, with attention instead being paid to whether it will alter its anticipated outlook for rates until the end of the next year.

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