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24/05/24
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USD Inches Down, But Set for Strong Weekly Gains
On Friday, the U.S. dollar inched down in early European trade but was still set for its biggest weekly increase in more than a month on expectations of early rate cuts by the Federal Reserve fading.
The U.S. dollar index, which measures its strength against 6 other major currencies, traded down 0.1% at 104.910, but was set for a 0.6% gain this week, the biggest one-week increase since April.
Thursday’s data showed U.S. business activity in May accelerated to the highest level in slightly more than 2 years, resulting in a pullback in expectations for an interest rate cut in the U.S. and an increase in government bond yields.
This came after the minutes of the Fed’s April meeting showed that policymakers were worried about persistent inflation, and this added weight to the comments from several officials urging caution over easing monetary policy.
According to the CME Fedwatch tool, traders were pricing an about equal chance of a hold and a cut — about 54% — in Sept., after earlier forecasts had shown a more than 50% probability of a cut.
The next noteworthy data release will likely be the personal consumption expenditures price index, the Fed’s preferred measure of inflation, which will be released on May 31.
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