Ankur Banerjee
SINGAPORE (Reuters) – The dollar remained broadly stable on Monday as investors awaited further guidance to help chart the path of U.S. interest rates following cautious comments from Federal Reserve officials, even as inflation shows signs of cooling.
The Japanese yen started the week weaker, weakening slightly to 155.80 per dollar, as traders remained on guard for signs of government intervention. Over the past couple of trading days, the currency has been moving in narrow ranges.
Data last week showed US consumer prices fell in April, pushing market prices down 50 basis points (bps), or at least two rate cuts this year, but different Fed officials have expressed caution about when rates might fall.
As a result, traders are betting on easing by about 46 bps. this year, and only the rate cut in November is fully accounted for.
On Monday, the euro rose 0.07% to $1.087525 in early trade, touching the nearly two-month high of $1.0895 it hit last week. The index, which measures the U.S. currency against six peers, was little changed at 104.46.
The focus will now turn to the Personal Consumer Expenditures (PCE) price index report, the Fed’s preferred measure of inflation, due May 31.
“The Fed won’t have enough data by the June or July meeting to be confident enough to cut rates,” said Brian Jacobsen, chief economist at Wealth Management App.
“In August, Fed Chairman Powell could use the Jackson Hole conference as a time to lay out his thoughts on the path forward for the September cut. Let’s hope the data matches.”
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Markets will also be focused on minutes from the Federal Reserve’s latest meeting, due on Wednesday. This week will also see the release of live PMI data for the eurozone, Germany, UK and US, as well as a list of Fed speakers.
“We do have Bostic, Barr, Waller and Jefferson on the performance calendar for today (Monday). More “higher lasts longer” comments seem likely, ING economists said in a note.
In other currencies, sterling last traded at $1.2705, just shy of the nearly two-month high it hit on Friday.
The Australian dollar was up 0.14% at $0.6703, while the New Zealand dollar was little changed at $0.61315.
(This story has been corrected to set Fed meeting minutes release date to Wednesday from Thursday in paragraph 9)