Dollar remains elevated; weakening risk appetite, Fed cut hopes support
Investing.com - The U.S. dollar edged lower in early European trade Monday, but remained elevated amid uncertainty over Federal Reserve rate cuts and with heightened Middle East tensions denting risk appetite.
“With Western allies urging restraint, the market is taking the position that the Netanyahu government will avoid the more aggressive and escalatory responses of a direct attack on Iranian military or nuclear facilities,” analysts at ING said, in a note.. “After last week's high US inflation data it is doubtful that any kind of weakness in retail sales data today can substantially move the needle on expectations for the Fed this year,” ING added.Dovish comments from a number of European Central Bank officials have pointed to a rate cut in June, likely before the Fed starts its rate-cutting cycle.
“Given that market pricing for a June BoE rate cut is just 31%, conversely, any downside surprise on wages or services data could hit sterling quite hard,” ING said.This yen weakness has traders on guard for any potential intervention in currency markets by the Japanese government, following repeated warnings from government officials in recent weeks.
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