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Investing.com – The U.S. dollar edged higher, just below the recent six-month high, making a steady start to the new week as traders digested last week’s series of central bank interest rate decisions.

At 03:20 ET (07:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 105.262, having hit a six-month high on Friday.

Dollar retains strength after hawkish Fed meeting

The dollar received a boost last week after the indicated that rates would be higher for longer, surprising the market with the hawkish nature of its predictions.

This contrasted significantly with its counterparts in and , who both halted their rate-hiking cycles, while the maintained its extremely accommodative monetary policy. 

This followed the previous week’s relatively dovish tone by the .

edged lower to 1.0650, just above the six-month low of 1.0615 seen on Friday, and was on track to lose roughly 1.8% for the month, its steepest monthly fall since May.

rose 0.1% to 1.2244, rebounding to a degree after sliding more than 1% last week, with the pound heading for a more than 3% fall in September, its worst monthly performance in a year.

traded largely unchanged at 148.38, not far removed from the pair’s 10-month high seen last week after the Bank of Japan’s dovish meeting.

“The result was a bit disappointing given that there wasn’t any clear sign of a shift in policy stance either from its statement or from Governor Ueda’s comments,” said analysts at ING, in a note.

The currency pair is within striking distance of 150, a level which many in the market see as prompting forex intervention from Japanese authorities.

Central bank speakers, inflation data due

There are a series of central bank officials due to speak this week, with ECB President starting the ball rolling later in the session, ahead of comments from Minneapolis Fed President .

Preliminary September consumer price data for the bloc is due at the end of this week, while there is also key U.S. inflation scheduled for Friday.

Ahead of this, the release is due later Monday, and will give an indication of the health of the eurozone’s most important economy.  

Chinese yuan drops on property woes

rose 0.2% to 7.3092, with the Chinese yuan struggling due to renewed concerns over China’s debt-addled property market.

Real estate giant China Evergrande (HK:) Group warned that it was unable to issue new debt due to a government investigation into its subsidiary Hengda Real Estate Group.

This fueled concerns over a broader debt freeze in the market, which is already reeling from a severe cash crunch over the past three years.

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India’s sovereign bond market, valued at a trillion dollars, is set to witness a significant inflow of foreign capital. This development comes in the wake of JPMorgan Chase & Co. (NYSE:)’s decision to incorporate Indian debt into its emerging market indices.

The multinational banking corporation disclosed this strategic move last week, assigning a maximum weightage of 10% to India in its primary emerging market index. The inclusion process will begin progressively from June 2024.

Financial forecasts predict that this decision by JPMorgan could attract over $20 billion in inflows. This substantial influx of new capital is expected to alleviate concerns about fund availability within the bond market and provide a boost to the Indian Rupee.

The impending foreign capital is anticipated to play a crucial role in stabilizing the supply-demand dynamics within the bond market and offer robust support to India’s currency. The move by JPMorgan is therefore expected to have a significant impact on the strength of India’s bond market and its national currency.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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The Pound (GBP) experienced further losses on Friday, rounding off a challenging week marked by a deepening contraction in the U.K.’s service sector activity, according to the latest survey. This development has intensified recession fears and fueled expectations that the Bank of England (BoE) has concluded its interest rate hikes.

The Confederation of British Industry’s (CBI) distributive trades survey today could potentially exacerbate GBP’s situation. Indications of persistent weakness in the U.K.’s retail sector might amplify concerns about the country’s economic health. The U.K. services sector, which contributes over 70% to GDP, is under scrutiny as a more pronounced contraction will continue to challenge the buyer appetite for the Pound.

Meanwhile, the Euro (EUR) saw choppy trade last Friday fluctuating broadly against its peers following the release of the latest PMI surveys. Manufacturing activity weakened more than expected, while the service sector score was above forecasts but still pointed to a contraction in activity. An anticipated downtick in German business morale could impact EUR today, with a speech from European Central Bank (ECB) President Christine Lagarde potentially influencing the common currency.

The U.S. Dollar (USD) also lacked a clear trajectory on Friday due to shifting market sentiment leading to some volatility in the safe-haven ‘Greenback’. Mixed results from U.S. PMIs contributed to this uncertainty, with manufacturing beating expectations while service sector activity disappointed. Market risk appetite could influence USD’s movement today. A speech from Federal Reserve hawk Neel Kashkari later today may lend support to USD.

The Canadian Dollar (CAD) initially rose on Friday due to an uptick in oil prices but retracted during the second part of the session as oil prices dipped and Canadian retail sales missed forecasts. With limited CAD data available today, oil price dynamics may continue to influence CAD.

Despite an upbeat market mood, the Australian Dollar (AUD) declined during last night’s session as weaker commodity prices impacted the resource-linked currency.

The New Zealand Dollar (NZD) also weakened on Friday due to declining commodities.

Later today, investors’ attention will be drawn to the Chicago Fed National Activity Index. Economists are forecasting a rise from 0.12 to 0.15 in August. The employment and consumption sub-components of the Index are also of interest, as tight labor market conditions and a pickup in consumption could fuel demand-driven inflationary pressures and support further Fed rate hikes.

Last Friday’s economic indicators have left monetary policy and economic divergence favoring the U.S. dollar. This week, U.S. economic indicators must align with forecasts to maintain pressure on the . Positive U.S. economic indicators could bring sub-$1.22 levels into play for GBP to USD price action.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.