Singapore, May 8 (BNA): The dollar started the week under pressure on Monday, as traders bet that it may have peaked alongside US interest rates, and sold off against peers who appeared to have gains ahead, despite looming caution. horizon. Inflation data and loans.
Sterling, which is hovering at an 11-month high of $1.2652, was also in focus ahead of an expected rate hike from the Bank of England on Thursday that markets don’t think will be the last, Reuters reported.
The euro, which gained nearly 16% from its September lows, rose 0.2% to $1.1042 although it was unable to breach the resistance at $1.11. The Australian dollar hit a three-week high and rose 0.4% to $0.6774.
The yen settled at 134.75 per dollar. Last week, the Federal Reserve raised interest rates by 25 basis points, but seemed a little more cautious than its peers on the outlook, dropping guidance on the need for future increases.
US interest rate futures are pricing in a one-third chance of a rate cut as soon as July, according to CME FedWatch – although stronger-than-expected US jobs data released on Friday suggested that could be premature.
“The Fed has tended to shy away from the possibility of rate cuts this year, which is somewhat at odds with the market pricing in cuts,” HSBC analysts said in a note.
“If the Fed proves right during 2023, it will make it difficult for the dollar to stretch,” the analysts wrote.
“But for the time being, the market is likely to go along with the topic of Fed peak rates warranting a clear peak in the dollar.”
The US dollar index fell for the second week in a row last week, losing about 0.4%, and fell by about 0.2% to 101.10 in Asia on Monday. The New Zealand dollar rose 0.3% to $0.6313.
Later on Monday, the Fed’s Loan Officers survey may show if, and how, banks are tightening credit after three US lenders failed in recent weeks — which could weigh on the dollar if it puts downward pressure on interest rates.
Traders will also be watching headlines from Capitol Hill as lawmakers try to negotiate a deadlock over the looming US debt ceiling, with the Treasury secretary warning that the government may be unable to repay debt by June 1st.
US inflation data is due on Wednesday.
“There is a risk that regional banking problems could escalate, posing a greater risk to the financial system and driving the dollar higher,” said Steve Englander, head of G10 currency research at Standard Chartered.
“However, the resilience of the big banks makes that unlikely, in our opinion,” Englender said. “We believe that mounting concerns about the debt ceiling is a more likely source of dollar risk aversion strength than demand for spot dollar liquidity.”