Dollar Strengthens Ahead of Fed Meeting and Employment Data
A Week Packed with Risk Events
Investing.com reported that the U.S. dollar edged higher in early European trade on Monday, garnering support ahead of a week filled with risk events. These events include a Federal Reserve policy meeting and the release of key employment data.
Steady Dollar Performance
At 04:45 ET (09:45 GMT), the Dollar Index, which measures the dollar against a basket of six other currencies, traded 0.1% higher at 103.362. This steady performance comes after the dollar reached a six-week high of 103.82 last week.
Attention on the Federal Reserve
Attention this week will be squarely on the Federal Reserve’s two-day policy meeting, which concludes on Wednesday. Market expectations are for the U.S. central bank to keep interest rates unchanged. Investors are eagerly awaiting Fed Chair Jerome Powell’s post-policy meeting press conference for any indication of the Fed’s stance on inflation and potential rate cuts.
Market Expectations
Markets are currently pricing in a 48% chance of a rate cut in March, according to the CME FedWatch tool. This is a significant decrease from the 86% chance at the end of December, indicating a shift in market expectations.
Upcoming Economic Data
Traders will also be closely watching for a slew of economic data this week, including the widely-watched monthly employment report on Friday. Additionally, data on manufacturing and services activity, as well as weekly jobless claims, are also on the agenda.
Euro Weakness and the Bank of England
The euro traded 0.2% lower at 1.0828, on course for monthly losses of around 2%. Meanwhile, the pound traded 0.1% higher at 1.2708 ahead of the Bank of England’s meeting later this week. The BoE is expected to keep interest rates on hold, with potential changes to its long-held warning on rate hikes and inflation.
Yuan Performance and Asian Markets
In Asia, the yen gained slightly, while the yuan fell ahead of the release of official economic data. The Bank of Japan maintained its ultra-loose policy at its meeting last week, impacting the performance of the yen. The yuan retreated slightly, with the upcoming release of official economic data likely to show continued economic challenges in China.
