The dollar index steadied above 102 on Monday as investors weighed the implications of the Federal Reserve’s pause in its tightening campaign against the hawkish stance of other major central banks.
The index, which measures the greenback against six major currencies, fell 1.2% last week after the Fed’s decision to keep rates unchanged. However, the central bank’s latest report to Congress hinted at further policy tightening this year, saying that inflation in key parts of the US services industry “remains elevated and has not shown signs of easing.”
Markets now expect the Fed to raise rates again by 25 basis points in July and stop after that. However, the ECB and the Bank of England are both expected to raise rates again this week, suggesting that the dollar’s recent weakness may be temporary.
The ECB delivered another 25 basis point rate hike on Thursday and signaled further tightening, while the BoE is widely expected to raise rates by 25 basis points on Thursday. These moves could put further pressure on the dollar, as investors rotate out of the greenback and into currencies that are seen as offering higher yields.
However, the dollar could also find support if the US economy shows signs of slowing down. The Fed’s pause in tightening could help to cool inflation, while the recent sell-off in US stocks could also weigh on the dollar.
Overall, the outlook for the dollar is uncertain. The greenback could continue to weaken if other central banks continue to raise rates, but it could also find support if the US economy shows signs of slowing down. Investors will need to monitor the latest economic data and central bank policy announcements to get a clearer picture of the dollar’s outlook.
- The dollar index has been on a downward trend since the start of the year, as investors have become more concerned about the impact of rising interest rates on the global economy.
- The Fed’s decision to pause its tightening campaign is a sign that the central bank is concerned about the risks to economic growth. However, the Fed has also said that it will continue to monitor inflation closely and could raise rates again if necessary.
- The ECB and the BoE are both expected to raise rates again this week, which could put further pressure on the dollar. However, the dollar could also find support if the US economy shows signs of slowing down.
- Investors will need to monitor the latest economic data and central bank policy announcements to get a clearer picture of the dollar’s outlook.