The dollar remained broadly stable today as traders speculated that US inflation would prompt the Federal Reserve to cut interest rates later in 2024.
The euro also stabilised ahead of the European Central Bank’s anticipated interest rate cut this week.
In May, the dollar experienced its first monthly decline of the year as expectations shifted regarding the timing and extent of interest rate cuts by the Federal Reserve. Market traders now anticipate a 37 basis point cut this year.
Data released last Friday showed that the personal consumption expenditures (PCE) price index rose 0.3% in April, consistent with the unrevised increase in March. Traders see a roughly 53% chance of an interest rate cut in September, up from 49% before the data was released.
Inflation data indicated that price pressures remain above the Federal Reserve’s target of 2%, with the annual PCE index rising 2.7% in April, similar to the March rate. This leaves market traders uncertain about further interest rate cuts in 2024.
The dollar index, which measures the US currency against six major currencies, recorded 104.58 points today. The index fell 1.56% in May but has risen 3% over the year.
The British pound rose 0.04% to $1.27, while the euro recorded $1.08 in recent transactions ahead of the European Central Bank’s monetary policy meeting on Thursday, where a rate cut is expected.
Traders predict the European Central Bank will cut interest rates by 57 basis points this year.
The Japanese yen fell to 157.42 against the dollar today, remaining close to its lowest level in four weeks at 157.715, which it touched last week.
