Dollar stable ahead of major upcoming events

19 Aug 2024 , 09:29 AM

The US dollar struggled to gain ground versus its peers on Monday, trading in a tight range as investors awaited new events this week that could provide hints about the outlook for US interest rates.

The minutes of the Federal Reserve’s July policy meeting and a speech by Chair Jerome Powell at Jackson Hole are expected to be the main drivers of currency movement this week, which will also include inflation data from Canada and Japan, as well as Purchasing Managers’ Index readings from the United States, eurozone, and the United Kingdom.

The euro recently bought $1.1026, while sterling soared to a one-month high of $1.2950 in an otherwise quiet Asian trading session, as speculations on an immediate start to the Fed’s easing cycle weighed on the dollar.

Against a basket of currencies, the dollar lost 0.06% to 102.40.

Traders have fully priced in a 25-basis-point rate decrease in September, with a 24.5% likelihood of a 50-bp shift. Futures indicate more than 90 basis points of easing by year-end.

Financial markets had a turbulent start to August following a slew of softer-than-expected U.S. economic data, particularly a weak jobs report for July, which triggered severe volatility as investors feared the world’s largest economy was headed for a recession and the Fed was being slow to ease rates.

With those concerns subsiding, conventional safe haven assets such as the yen, which benefited from a flight to safety, have given back some of their early August gains.

The Japanese yen was recently down 0.2% at 147.93 per dollar, having slid 4% from a seven-month peak at the beginning of the month.

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