Dollar Struggles to Hold onto Gains Ahead of Central Bank Meetings

The dollar attempted to maintain its gains on Monday as anticipated decisions by central banks in Japan and Europe, along with the volatile market expectations surrounding a potential cut in US interest rates, led to the halt of its upward momentum driven by data in the later part of last week.

The yen was the notable exception in otherwise calm trading, moving away from its one-month low on Friday at 148.80 and rising to 147.74. It has been the yen’s biggest decline against the dollar this year, dropping approximately five percent in a rapid turnaround from its December peak near 140.

The Bank of Japan (BOJ) begins a two-day meeting on Monday. The expectations for a shift in monetary policy at this meeting have decreased following the earthquake that hit the western coast of Japan in the first days of the new year, along with cautious comments from bank officials.

The dollar index decreased by 0.09% to 103.19 points and remained stable against the euro at 1.0901 dollars.

The markets are anticipating several events this week, as the European Central Bank, the Bank of Canada, and the Central Bank of Turkey will hold monetary policy meetings on Thursday.

Additionally, there is a busy earnings season for companies and disruptions in the Red Sea that have impacted global trade and supply chains.

Before the European Central Bank meeting, the discussion changed as policymakers accepted that the next step is to reduce borrowing costs, but later and to a lesser extent than markets expected. Market analysts believe that inflation expectations for the European Central Bank are incorrect, and they expect five interest rate cuts this year.

The British pound traded at 1.2716 dollars in the latest transactions, rising by 0.12 percent during the day.

The pound had fallen last week after Friday’s data showed the largest decline in retail sales in three years.

The currency received support from continued inflation rates and the belief that the Bank of England is unlikely to lower interest rates at the same pace as the European Central Bank or the Federal Reserve.
(reuters)