The US dollar began the week on a weaker note, declining against major currencies as investors braced for a pivotal speech by Federal Reserve Chairman Jerome Powell scheduled for Tuesday. With the Federal Open Market Committee (FOMC) entering its customary silence period ahead of the July 29-30 meeting, the market’s attention has turned to upcoming June home sales data and Powell’s potential clues on interest rate policy.
Recent economic signals have left investors grappling with mixed expectations. While the Fed has held off on further rate hikes, persistent inflation continues to cloud projections. This ambiguity has sustained market volatility and pressure on the greenback, as reflected in the subdued US dollar index.
President Joe Biden has faced mounting political pressure similar to that of his predecessor, Donald Trump, who repeatedly urged for rate cuts. Despite these pressures, Jerome Powell has maintained the central bank’s cautious stance, resisting hasty monetary easing until more favorable economic indicators emerge.
Foreign exchange movements on Monday reflected the global apprehension. The EUR/USD pair inched up to 1.1651 from 1.1626 at Friday’s close. GBP/USD advanced to 1.3469, while USD/JPY dropped to 147.6741, affected by the Japanese holiday and lack of new economic data. The Canadian dollar also gained ground, with USD/CAD slipping to 1.3712 ahead of key industrial and raw material price data from Statistics Canada.
In China, the offshore yuan traded flat at around 7.17 per dollar following the People’s Bank of China’s decision to keep benchmark lending rates unchanged, as widely anticipated.
Meanwhile, Europe is preparing for this week’s European Central Bank meeting, with no immediate rate action expected. Analysts believe the upcoming ECB and Bank of Japan decisions may offer further market cues, especially as the global economy continues to wrestle with inflationary pressures and trade policy uncertainties.
