The dollar began to move cautiously on Monday as markets braced for US inflation data and a series of Federal Reserve speakers this week, while the yuan remained hungover after the latest plan disappointing recovery from Beijing.
Underscoring the weak backdrop in China, data released over the weekend showed consumer prices rose at the slowest pace in four months in October, while producer price deflation continued. aggravated.
Reports on retail sales and industrial production due Friday are expected to show whether Beijing’s various stimulus attempts are having a real effect on demand.
Disappointment over the latest package saw the Australian and New Zealand dollars fall on Friday, with both countries being major exporters to China.
The dollar settled at 7.1970 yuan, after jumping 0.7% on Friday, and looks set to retest the 7.2000 barrier.
The moves were minor overall, with U.S. bond markets on holiday, although stocks and futures were open. The dollar was up 0.1% against the yen at 152.90, having been dragged down from last week’s high of 154.70 by the risk of Japanese intervention.
The dollar index was a little firmer at 105.00, after gaining 0.6% last week, mainly against the euro.
The single currency remained stuck at $1.0711, after losing 1% last week to $1.0683. Support now lies around $1.0667 and $1.0601.
Political uncertainty remained a drag as German Chancellor Olaf Scholz said he would be prepared to hold a confidence vote before Christmas, paving the way for snap elections following the collapse of his governing coalition.
THE FED IS WITHDRAWING
The euro has come under pressure from US President-elect Donald Trump’s proposals for tariffs on imports, which could hurt European exports and risk triggering a global trade war.
Analysts also speculate that Trump’s policies would put upward pressure on inflation and bond yields in the United States, while limiting the Federal Reserve’s room to ease policy.
“Under these conditions, we still expect the Fed to cut rates by another 25 basis points at the December meeting, but will now only do so once a quarter, unlike our previous forecast which called for a reduction of 25 basis points at each meeting,” said Michael Feroli, an economist at JPMorgan.
“Additionally, we now believe the Fed will conclude once it hits 3.5%, whereas we previously forecast a final rate of 3.0%.
A host of Fed officials are speaking this week, including Chair Jerome Powell on Thursday, so there will be plenty of guidance on the rate outlook.
The data will also be influential: US consumer prices are due on Thursday and a core reading above the forecast 0.3% would further reduce the chances of easing in December.
All of these are seen as positive for the dollar in the long term, although it remains to be seen what Trump’s policies will be in practice.
His support for cryptocurrencies was enough to propel bitcoin above $80,000 for the first time, as investors bet on more favorable regulation.
