Investing.com – The US dollar fell on Monday ahead of the release of the minutes of the Federal Reserve’s July policy meeting and Chairman Jerome Powell’s upcoming speech in Jackson Hole later this week.
At 05:40 ET (09:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% lower at 101.977, falling near a seven-month low.
Bearish dollar momentum is starting to build
The , due Wednesday, and Powell’s on Friday are likely to be the main drivers of currency moves this week, and traders expect a dovish tone to emerge.
“The signs are subtle, but bearish dollar momentum is starting to build,” ING analysts said in a note. “The DXY is now falling through the early August lows. Events this week, such as the July FOMC minutes, payroll revisions and Federal Reserve speakers, could extend the dollar’s losses. Investors may want to see how much lower they can drag the dollar into September.”
The Fed has kept its benchmark interest rate at the current level of 5.25%-5.50% since July last year, after raising its policy rate by 525 basis points since 2022.
Traders have fully priced in a 25 basis point Fed rate cut in September, with a 24.5% chance of a 50 basis point move.
The pound sterling rises to a one-month high
In Europe, it traded 0.2% higher at 1.2963, rising to a one-month high as the pound benefited from dollar weakness.
“GBP/USD looks set for a retest of the year’s high at 1.3045 as broad dollar weakness dominates global currency markets,” ING analysts said. ‘We had thought the Bank of England’s easing could keep sterling’s gains in check. BoE Governor Andrew Bailey will speak about this at the Fed’s Jackson Hole symposium next Friday.”
“What we may be underestimating, however, is the demand for sterling coming from mergers and acquisitions activity. Britain is the target region for more than $200 billion in deals this year.”
traded 0.1% higher at 1.1037, heading towards last week’s seven-month high.
“If EUR/USD were to start trading through 1.11, we would not underestimate its power as realized volatility has been so low for so long,” ING added.
The yen rises higher
In Asia, yields fell 1% to 146.05, with a big move lower on broad dollar weakness along with the possibility of further policy divergences between the US and Japan.
Bank of Japan Governor Kazuo Ueda will appear in parliament on Friday, where he is expected to discuss the central bank’s decision last month to raise interest rates.
fell 0.3% to 7.1408, with the yuan heading for its sharpest gain in two weeks, following a wave of broad dollar selling as investors bet on U.S. interest rate cuts.
