The dollar dips somewhat before a massive data release.
Forex News Dated:-29-08-2023
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With a plethora of important economic data set to be released this week, the U.S. dollar retreated from near three-month highs in early European trade on Tuesday.
The Dollar Index, which measures the strength of the US dollar relative to a basket of six major currencies, was down 0.1% at 03:10 ET (07:10 GMT) on Tuesday, following a 0.2% drop on Monday.
The dollar falls before a data leak.
Traders seem to have opted to lock in some profits ahead of the release of several important economic data points this week, including Friday's highly anticipated monthly employment report.
On Tuesday afternoon, the United States will release its consumer confidence numbers, and on Wednesday, the GDP for the second quarter will be corrected. On Thursday, the Federal Reserve's favored inflation index, personal consumption expenditures, will be released, and on Friday, the Labor Department will report on nonfarm payrolls for the month of August.
If the U.S. economy shows signs of strength, especially with regard to inflation and employment, the Federal Reserve will have greater reason to maintain its current pace of interest increases.
Powell's hawkish tone is supportive of the dollar.
However, the dollar is up over 2% this month and has risen for six weeks in a row as a result of optimistic forecasts that higher interest rates will be maintained for the foreseeable future thanks to robust U.S. economic statistics.
Fed Chair Jerome Powell's comments at last week's Jackson Hole conference added to these projections by indicating that additional interest rate hikes may be necessary to reduce inflation, which is currently too high.
When deciding whether to tighten monetary policy further or maintain the current policy rate while awaiting additional data, the Fed will move cautiously, Powell promised.
Even if the Fed is not likely to raise rates at its September meeting, the likelihood of a rate hike by the U.S. central bank in November has increased.
The euro falls as German optimism decreases.
The Euro dropped 0.1% against the Dollar to 1.0811 on reports that German consumer mood would decline in September. The GfK consumer sentiment index dropped to -25.5 from -24.6 in August (slightly revised).
According to Ralf Buerkl, a consumer specialist at GfK, "the chances that consumer sentiment can sustainably recover before the end of this year are dwindling more and more."
Christine Lagarde, president of the European Central Bank, advocated for higher interest rates to be in place for a longer period of time on Friday in order to meet the ECB's primary objective of bringing inflation back to its 2% target.
The annual inflation rate for the Eurozone is forecast to fall to 5.1% in August from 5.3% in July, although this is still significantly above the ECB's 2% objective. This data will be released later this week.
Meanwhile, the USD/CNY exchange rate remained unchanged at 7.2903, the AUD/USD increased 0.2% to 0.6444, and the GBP/USD exchange rate rose 0.1% to 1.2614, rebounding from two-month lows reached last week.
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