The dollar index started the week at its highest level in three months. Investors expect that economic data to be released this week will provide limited clues about the health of the US economy and may reinforce the Fed’s cautious stance.
Last week, the Fed cut interest rates by 25 basis points, but Chairman Jerome Powell indicated that a further cut this year is unlikely.
Due to the government shutdown, some data will be delayed, so investors will only be looking for direction with the ADP employment report and ISM PMI data.Some Fed officials have expressed discomfort with the easing decision. This has reduced the probability of a rate cut in December to 68%.
The Euro is at its lowest level in three months at $1.1513; the British pound is down 0.4% at $1.3118. The Japanese yen is trading near its weakest level in eight months, at 154.1. These developments have pushed the dollar index to 99.89. Experts note that the index has been fluctuating between 96 and 100 for the past six months, and it remains to be seen whether it will break this range. Lee Hardman of MUFG emphasized that the dollar’s strength stems from “hawkish pricing in Fed expectations.” On the other hand, the depreciation of the yen is prompting Japanese authorities to consider the possibility of intervention. The Bank of England (BoE) is meeting this week. Analysts are assessing the possibility of a 25 basis point interest rate cut following weak inflation data.
