Investing.com – The U.S. dollar was lower in European trading on Monday, giving up some of its gains from the previous week ahead of the Federal Reserve’s upcoming policy meeting.
At 0600 ET (1000 GMT), the dollar index, which tracks the dollar against a basket of six other currencies, was trading 0.1% lower at 103.035, after gaining about 0.5% last week. which was its first weekly gain in four weeks.
The dollar fell slightly ahead of the Fed meeting
The US currency started the new week on a slightly negative note but remains near two-week highs after strong US inflation figures last week left traders wary of any hawkish sentiment from the US central bank. policy-setting meeting this week, concluding Wednesday.
Markets are now forecasting a rate cut of about 75 basis points this year, down from about 140 bps. at the beginning of the year, while, according to LSEG, the probability of the first rate cut by June is about 60%.
On Wednesday, the focus will be on whether Fed policymakers will change their rate cut forecasts (dot plots) for this year.
“There are currently three 25bp rate cuts in the median dot plot for 2024, but forecasts are so spread out that it would only take two FOMC members changing their dot to bring the median to two or four rate cuts. this year,” ING analysts said in a note.
“We expect a flat dot plot, but recognize that a hawkish revision looks more likely than a dovish one.”
The euro is slightly higher
In Europe, the index rose 0.1% to 1.0899 after euro zone consumer prices were confirmed to be close to the European Central Bank’s medium-term target of 2% in February.
The bottom line was 2.6% annualized in February, down from 2.8% in the previous month, as expected, while the headline annual rate fell to 3.1% from 3.3% in January.
With several ECB speeches expected this week, including the president on Wednesday, the latest rumors coming out of the central bank tend to point to a rate cut in June.
“My current view is that the picture should be clear enough when the Governing Council meets in June (as we will have much more information – especially on wage dynamics) in our discussions – to give us enough confidence to make a monetary less restrictive policies. “, politician Gabriel Makhlouf said on Friday, adding to this sentiment.
was trading 0.1% lower at 1.2738, with rates widely expected to remain unchanged at Thursday’s meeting.
“Following the downward hawkish tone in February, we do not see the Bank in any rush to take further steps towards the dovish spectrum, at least barring a major surprise in the CPI decline on Wednesday,” ING said.
Volatile yen ahead of Bank of Japan meeting
In Asia, shares traded 0.1% higher at 149.22 amid volatile trading ahead of the Bank of Japan’s upcoming meeting.
The two-day meeting began early Monday, with a long-awaited decision due on Tuesday.
USD/JPY fell to 146 on speculation that the central bank is set to end its ultra-dovish policy, but traders remain divided on whether the bank will raise rates in March or April, with general consensus leaning slightly towards April level. move.
The index rose 0.1% to 7.1982 after a series of economic data released that gave mixed signals about the Chinese economy.
Although it rose more than expected in the first two months of 2024, expectations were not met and rose unexpectedly.
The People’s Bank of China is also set to make a decision this week, but is widely expected to leave rates unchanged.