The dollar index, which tracks the currency against a basket of six other major currencies, fell 0.1% to 103.020, after falling from last week’s high of 103.63, a level last recorded time on March 20.
The dollar took a heavy hit late last week when negotiations to raise the US debt ceiling to avoid a very damaging default suddenly broke down and Republicans walked out of the meeting.
Debt ceiling: expectations for progress in the negotiation between Joe Biden and Republicans
US President Joe Biden and Republican Speaker of the House Kevin McCarthy are due to meet this Monday, though compromises will have to be made and therefore more clashes are to be expected before early June, which is when the Treasury would run out of money.
Also of interest today will be appearances by FOMC members James Bullard, Thomas Barkin, and Raphael Bostic, after Fed Chairman Jerome Powell will hint on Friday a pause in the US central bank’s rate hike cycle in June.
The tightening of credit conditions means that “it may not be necessary to raise our key interest rates as much to meet our targets,” Powell told a conference in Washington.
This followed aggressive remarks by several regional Fed chairmen over the past week, which fueled market expectations of a hike at the next meeting.
How does the rest of the currencies work?
The EUR/USD pair points up 0.1% to the 1.0819 level, continuing Friday’s rally from seven-week lows awaiting speeches from Central Bank officials Luis de Guindos and Philip Lane European.
These policy makers are likely to talk of further ECB hikes after President Christine Lagarde declared on Friday that the central bank needs to keep interest rates high to curb inflation over the medium term.
“We still have to keep interest rates high and sustainable, so it is time to tighten our belts, look at the objective we have and meet it,” Lagarde said in an interview for the Spanish public television channel TVE.
The ECB has set a medium-term inflation target of 2%, while core prices slowed only slightly in April from 7.5% to 7.3%.
GBP/USD is mostly flat at 1.2438, just above last week’s 3-week low, AUD/USD is down 0.2% at 0.6633, while USD /JPY fell 0.1% to 137.85, the Japanese yen buoyed by the possibility of a pause in US interest rate hikes.
The USD/CNY pair is aiming for 0.2% higher to the 7.0225 level, and remains above the psychologically significant 7 level, even after US President Joe Biden signaled a possible improvement of relations between China and the United States.
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