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Pediafx.com – Tuesday 29 August 2023

Pediafx.com – “The US dollar edged lower in early European trading on Tuesday, retracing from a three-month high ahead of the release of several key economic data this week.

At 14:10 WIB, the Dollar Index, which tracks the greenback against six other currencies, traded down 0.1% at 103.907, after a 0.2% decline on Monday.

Dollar dips ahead of multiple data releases
Traders seemed to have decided to pocket some gains at the beginning of the week, which includes the release of several major economic data culminating in Friday’s highly anticipated monthly jobs report.

US consumer confidence data will be released on Tuesday, while the revised second-quarter gross domestic product figures will be available on Wednesday. Personal consumption expenditures data, a preferred inflation measure by the Federal Reserve, will be released on Thursday, while August nonfarm payrolls will close out the week.

Any signs of resilience in the US economy, particularly regarding inflation and employment, will provide a stronger impetus for the Fed to continue raising interest rates.

Powell supports the greenback with a hawkish tone
Nevertheless, the dollar has still risen over 2% this month and has experienced six consecutive weeks of gains as strong US economic data support expectations that interest rates will remain higher for a longer period.

Federal Reserve Chair Jerome Powell further fueled these expectations with his comments at the Jackson Hole Symposium last week, signaling that further rate hikes may be necessary to cool down inflation that remains too high.

“We will proceed with caution as we decide whether to tighten further or, conversely, to maintain the policy rate and wait for more data,” Powell said.

The next Fed meeting is scheduled for September, and although no rate hike is expected at that time, expectations are growing that the US central bank will raise rates in November.

Euro falls on weak German sentiment
EUR/USD declined 0.1% to 1.0811 after German consumer sentiment was seen falling in September. The GfK consumer sentiment index dropped to -25.5 from a revised -24.6 in August, due to the ongoing burden of high inflation.

“The possibility of consumer sentiment recovering sustainably before the end of this year is diminishing,” consumer expert Ralf Buerkl of GfK expressed.

European Central Bank President Christine Lagarde revealed higher interest rates for a longer period on Friday in order to achieve the central bank’s primary goal of returning inflation to the 2% target.

Eurozone inflation figures for August will be released this week, and the annual figure is expected to show a slight decline to 5.1% from 5.3% in July, still well above the central bank’s 2% target.

Elsewhere, GBP/USD rose 0.1% to 1.2614, rebounding from last week’s two-month low position, USD/JPY fell 0.1% to 146.44, nearing its 10-month high level, AUD/USD rose 0.2% to 0.6444, while USD/CNY traded flat at 7.2903.”

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