May 6 2024: The U.S. dollar stabilized on Monday following a recent decline triggered by disappointing nonfarm payrolls data, prompting investors to reassess the Federal Reserve’s interest rate trajectory for the year.
As of 04:31 ET (08:31 GMT), the U.S. Dollar Index, which measures the dollar’s performance against a basket of major currencies, was up 0.04% at 105.07, recovering from a low reached last week that was the weakest in over three weeks.
Last week’s data showing weaker-than-expected nonfarm payrolls led to speculation that the Fed might move up its rate-cut timeline, possibly as soon as September, in contrast to earlier expectations of a reduction in November.
Investor attention is now focused on speeches by key Fed officials this week, starting with New York Fed President John Williams and Richmond Fed President Thomas Barkin today, followed by Minneapolis Fed President Neel Kashkari tomorrow. Later in the week, Chicago Fed President Austan Goolsbee and Fed Governor Michelle are also scheduled to speak.
The euro edged up 0.1% to $1.0769, with the European Central Bank expected to announce a rate cut in June, although uncertainty remains regarding post-meeting monetary policy.
The British pound rose 0.2% to $1.2573, buoyed by positive services sector data in the U.K. last week, potentially delaying rate cuts by the Bank of England.
Most Asian currencies weakened against the dollar, reflecting concerns about elevated U.S. borrowing costs in the short term. The Japanese yen’s USDJPY pair increased by 0.6%, although trading was limited due to a market holiday in Japan. The Chinese yuan’s USDCNY pair declined by 0.4%.
The Australian dollar’s AUDUSD pair climbed 0.3%, nearing two-month highs ahead of the Reserve Bank of Australia’s meeting on Tuesday. While no rate changes are expected, a strong inflation reading in the first quarter could lead to a more hawkish stance from the RBA.
