The dollar rose slightly against the euro and yen, but remained near lows after the sharp decline following weak US jobless data released on Friday. Investors expect the ISM Services Data to show a slight improvement in favor of the dollar.
Goldman Sachs forecasts that the Fed will make three consecutive 25 basis point interest rate cuts starting in September. A 50 basis point cut is also possible if the next employment report shows a further increase in the unemployment rate.
Furthermore, it is anticipated that the European Central Bank has completed its expansion cycle. The Euro fell by 0.25% to $1.1544, while the dollar index rose by 0.30% to 98.864. The pound sterling rose 0.05% to $1.3291 as investors expected the Bank of England to keep interest rates unchanged this week.Interest Rate Cut Expectations Are Rising
The market is pricing in a 92% probability of the Fed cutting interest rates in September. Last week, this rate was 63%. Furthermore, expectations have formed for a 130 basis point interest rate cut by October 2026.
The Japanese Yen depreciated by 0.34% to 147.6 yen/dollar after the Bank of Japan indicated it might review its policies.
Tariff Uncertainties
The US imposition of new tariffs on imports from several countries last week increased risks to the global economy, while Trump’s new trade policies remain uncertain.
The Swiss Franc fell by a further 0.25%, dropping to $0.8103, following a 0.5% drop the previous day. However, it remained above the level seen before Friday’s data.
