What’s going on here?
The dollar held steady on Monday as investors awaited more clues about the US
interest
rate path following cautious comments from Federal Reserve officials, despite cooling
inflation
.
What does this mean?
US
consumer
data showed prices easing in April, initially leading markets to anticipate a 50 basis point rate cut this year. However, Fed officials have been cautious, with current bets on about 46 basis points of easing and a rate cut fully priced in by November. The dollar index held firm at 104.46, while the euro nudged up 0.07% to $1.0875, approaching a two-month high. Investors will closely watch the Personal Consumption Expenditures (PCE) price index report due on May 31 for further insights.
Why should I care?
For markets: Interest rates in the spotlight.
Markets are focused on the Fed’s upcoming decisions, including minutes from the last meeting and commentary from several Fed speakers this week. Atlanta Fed President Raphael Bostic and other officials are expected to lean toward a ‘higher for longer’ stance. Any shift in this narrative could cause significant market reactions.
The bigger picture: Global economic signals.
Outside the US, the Japanese yen weakened due to intervention worries, while the euro and sterling approached two-month highs. Investors are watching global flash Purchasing Managers’ Indexes (PMIs) coming this week, which could indicate broader economic health across the eurozone, Germany, the UK, and the US.
