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The US dollar is headed for a new low for the year as dovish remarks from Federal Reserve members and weak economic data point to a potential slowdown in the central bank's rate hikes. The euro was among the Group of 10's top gainers on Monday as the USD Spot Index plummeted as much as 0.3%, approaching its lowest level since April of last year. Before a slew of speakers on Monday, including the president of the European Central Bank, the single currency of Europe rose as high as 0.7% to $1.0927.
Following economic data including a drop in retail sales and manufacturing output, Fed policymakers last week outlined the case for another downshift in the central bank's tightening campaign, with Governor, one of the most hawkish at the Fed, advocating a quarter-point rate hike. According to the most recent Commodity Futures Trading Commission statistics, institutional investors, including pension funds, insurance companies, and mutual funds, have increased net short positions in the dollar to their highest level since June 2021.
The dollar is suffering as a result of softer US data as the US loses its growth edge. PMI this week might stoke the flames. Lagarde stated Friday that even while the rise in consumer prices looks to have peaked, policymakers in Europe must continue their fight against inflation. Although overall inflation has decreased, December saw a record increase in underlying price growth.
The economists of the Commonwealth Bank of Australia, stated in a note that the euro could rise further this week if preliminary Purchasing Managers Index data, which are coming on Tuesday, show that the economy is expanding. Because energy costs have continued to decline, we consider the risks slanted towards a greater PMI reading than the consensus predict.
