Kevin Buckland and Alan John
TOKYO/LONDON (Reuters) – The U.S. dollar weakened slightly on Monday at the start of an eventful week for markets, given the British budget, the European Central Bank meeting, U.S. jobs data and major political developments in both China and the United States. due.
Attention has also turned to , which hit a more than two-year high above $65,000 after a quiet weekend and has been pushed higher in recent weeks by heavy flows into cryptocurrency exchange-traded funds, especially in the United States.
The euro was up 0.13% at $1.08, sterling was up 0.19% at $1.2677 and the Japanese yen hovered around the closely watched 150 per dollar level. The dollar was last up 0.20% at 150.43 yen.
As a result, the index, which measures the currency against six major peers, remained at 103.82, hovering in the lower half of last month’s 103.43-104.97 range.
“The coming week will be a busy one for ‘event risk’ in the US and Europe, which could certainly trigger some increase in volatility from current very low levels,” said Lee Hardman, senior FX analyst at MUFG.
He added that there are reasons why each of the major events individually could leave markets cold.
In the United States, Federal Reserve Chairman Jerome Powell testifies before lawmakers on Wednesday and Thursday, and on Friday there will be US employment data, with forecasts pointing to a still robust rise of 200,000 after a meteoric jump of 353,000 in January.
This week also marks Super Tuesday, the most important day in the US presidential primary calendar.
“Wages estimates may be a more important factor as Powell is likely comfortable with the current market price for Fed cuts, and if we get another strong payrolls reading after the last blowout report that could impact market expectations (on policy) Fed),” Hardman said.
RATE EXPECTATIONS
At the start of 2024, markets were forecasting a significant cut in interest rates earlier this year, but traders have since cut such rates.
Prices in derivatives markets now reflect expectations that the Fed’s first rate cut will come in June, with three to four 25 basis point cuts this year, not far from the Fed’s forecasts released in December.
With expectations for other central banks, especially the European Central Bank and the Bank of England, moving almost in lockstep, currency volatility – driven in part by changes in interest rate differentials – has been strikingly low and at its lowest level since economic expansion began. war in Ukraine.
Britain’s budget is due on Wednesday and Chancellor Jeremy Hunt is trying to tamp down speculation about big pre-election tax cuts. The European Central Bank (ECB) will meet on Thursday.
Most ECB policymakers are cautious about suggesting that interest rates will be cut soon.
Hardman said stronger-than-expected euro zone inflation data last week meant the ECB was unlikely to say anything at this week’s meeting, prompting markets to raise expectations for the first rate cut currently seen in June .
The Swiss franc rebounded briefly after Swiss February inflation came in slightly above expectations at 1.2% year-on-year, although still below January levels and within the Swiss National Bank’s 0-2% target range.
The currency gave back some of that sudden gain, and against the franc, the dollar rose 0.09% to 0.8837 francs and the euro added 0.23% to 0.9594.
The Australian dollar was slightly lower at $0.6524 as traders await domestic GDP data on Wednesday. Given Australia’s close economic ties with China, the currency will also be determined by the annual meeting of China’s parliament, which begins on Tuesday, at which authorities will announce GDP targets and are expected to unveil modest economic stimulus plans.