The U.S. dollar found stability on Monday following a week of volatility, as investors awaited remarks from Federal Reserve officials that could signal the next steps in monetary policy ahead of important inflation data.
At 04:20 ET (08:20 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, traded slightly lower at 97.155. Last week, the index had dipped to its lowest levels in over three years after the Fed’s rate cut, before rebounding sharply amid choppy trading.
Focus on Fed speakers
Traders are closely watching comments from Fed officials for insight into the future path of interest rates after the central bank restarted its rate-cut cycle last week—the first reduction this year. Fed policymakers John Williams, Thomas Barkin, and Stephen Miran are scheduled to speak at separate events on Monday, while Raphael Bostic, Michelle Bowman, and particularly Fed Chair Jerome Powell will address the market on Tuesday.
These speeches, combined with upcoming economic releases, are expected to influence investor sentiment, with two additional Fed meetings remaining in 2025. The U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, will be released on Friday. The August reading is anticipated to rise slightly to 2.8% from July’s 2.6% annual rate.
“Plenty of Fed speakers this week will clarify the FOMC’s policy views after Chair Powell’s cautious remarks last week,” analysts at ING said in a note. “With the Dot Plot signalling two more cuts this year, we don’t expect much support for the dollar, which is looking moderately expensive in the short-term.”
Euro and sterling movements
In Europe, EUR/USD ticked up 0.1% to 1.1762 ahead of the latest eurozone consumer confidence report. “This week’s eurozone calendar revolves around tomorrow’s PMIs, which are expected to flatten up after some good August readings. Later this week, the German Ifo will complete the activity survey picture,” ING added. “EUR/USD’s short-term fair value is 1.190 as of this morning, and we see upside risks beyond the 1.180 level this week as the dollar may shed its post-Fed gains.”
GBP/USD rose 0.2% to 1.3499, recovering after sterling fell to a two-week low last week amid domestic pressures from rising public borrowing and a Bank of England decision highlighting the delicate balance between growth and inflation.
Asian currencies
USD/CNY dipped slightly to 7.1138 after the People’s Bank of China left its benchmark loan prime rates unchanged, as expected. The one-year LPR remained at 3.0% and the five-year LPR at 3.5%. Despite weak factory output and retail sales, the PBoC held policy steady, likely awaiting the Fourth Plenary Session in October for reassessment.
USD/JPY gained 0.1% to 148.09, trading in a narrow range following the Bank of Japan’s decision last week to keep rates unchanged. AUD/USD edged down 0.2% to 0.6579 after Reserve Bank of Australia Governor Michele Bullock noted that recent economic data mostly met expectations, though global uncertainty persists.
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