Dollar

The dollar held steady on Monday as investors awaited further guidance on the trajectory of U.S. interest rates following cautious remarks from Federal Reserve officials, despite signs of easing inflation.

The euro remained largely unchanged at $1.0865, near a nearly two-month high of $1.0895 reached last week. It has gained 2% in May, supported by a weaker dollar stemming from softer U.S. growth and inflation data, as well as improved economic conditions in the eurozone.

Recent data indicated that U.S. consumer prices rose less than anticipated in April, leading markets to price in a 50 basis point cut in Fed rates for this year. However, comments from various Fed officials tempered expectations, resulting in market pricing just below the 50 bp threshold.

The dollar index, which measures the currency against six major peers, edged slightly higher to 104.51. It has declined approximately 2% since reaching a more than five-month high in April.

Neil Jones, of TJM FX, noted that a flurry of speeches from Fed officials this week will keep investors vigilant, suggesting that officials may adopt a contrarian stance in their commentary if market sentiment becomes too entrenched in expectations of interest rate cuts.

Four Fed speakers, including Atlanta Fed President Raphael Bostic, are scheduled to speak on Monday. Market attention will also be on the minutes of the Fed’s recent meeting, set to be released on Wednesday.

Additionally, economic surveys for the eurozone, Germany, the UK, and the U.S. are due this week, along with more central bank speeches.

Sterling reached a two-month high of $1.2711 and remained near that level ahead of the UK inflation report scheduled for Wednesday.

The Japanese yen traded flat at 155.73 per dollar, with traders monitoring for signs of government intervention following a period of volatility in early May due to suspected currency interventions by Tokyo.

Jones anticipates that a rally in gold and copper prices will bolster the currencies of commodity-exporting countries such as Australia in the coming months. The Australian dollar was unchanged at $0.6687 but has risen 3.3% this month amid strong Australian inflation data.

Meanwhile, oil prices edged up on Monday following a helicopter crash that killed the president of Iran and amid health concerns surrounding Saudi Arabia’s king, raising concerns about potential instability in the Middle East.

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