Dollar Stable as Investors Await Key Economic Data

SINGAPORE: The U.S. dollar commenced the week on a stable note as investors brace for a series of economic data releases, potentially offering an initial assessment of the impact of U.S. trade policies.

The dollar stood at 143.57 yen and $1.1360 per euro, having established a temporary base. However, it remains poised for its most significant monthly decline in approximately two and a half years due to concerns about the reliability of U.S. assets.

The dollar has depreciated by over 4% against both the euro and the yen in April. Nevertheless, it experienced a rebound at the conclusion of the previous week, spurred by a perceived moderation in U.S.-China relations.

Recent weeks saw a seeming de-escalation, with the U.S. administration hinting at a willingness to lower tariffs and China considering exemptions for specific imports from its levies.

While there have been assertions of progress, with claims of discussions between leaders, Beijing has refuted the occurrence of trade negotiations. Furthermore, a top official did not confirm that tariff discussions were in progress.

ING’s global head of markets, Chris Turner, stated, “The immediate concern revolves around whether recent volatility has influenced decisions in the real world, particularly within the U.S. job market.”

Consequently, investors are keenly awaiting the U.S. jobs report for April, scheduled for release on Friday, with projections indicating a notable deceleration in hiring.

The U.S. is also set to unveil first-quarter gross domestic product (GDP) figures and the Federal Reserve’s preferred inflation metric, core PCE, this week. Concurrently, Europe will release GDP and preliminary inflation data.

An impending inflation report from Australia is expected to have little impact on expectations of a rate cut, which financial markets have largely priced in for the coming month.

The Australian dollar is trading close to recent peaks and was marginally below $0.64 on Monday morning. Similarly, the New Zealand dollar hovered just below $0.60.

According to a strategist at the Commonwealth Bank of Australia, “AUD/USD might breach the resistance level at 0.6464, a level which has proven challenging this month.”

Canada is holding elections, with the governing Liberal Party holding a slight edge in polls and a more substantial one in online prediction markets. Options markets suggest traders anticipate minimal currency volatility, with the Canadian dollar holding steady at C$1.3874 per dollar.

The Bank of Japan is slated to determine monetary policy on Thursday.

Although no policy changes are anticipated, market participants will closely scrutinize the outlook and the strategies policymakers intend to employ to navigate economic uncertainty, especially given that U.S.-Japan trade discussions are expected to encompass currency matters.

A high-ranking currency official refuted claims that there was any assertion during a bilateral meeting with Japan that a weak dollar and a strong yen are desirable.