The US dollar traded largely flat on Monday at the start of the European session, near multi-week lows as traders appeared reluctant to take news positions at the start of the week that includes a policy-setting meeting by the Federal Reserve.
At 02:55 ET (06:55 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading flat at 103.153, after falling 0.5% last week, its worst weekly performance. Since mid-April.
Traders are watching the economic data
The dollar fell last week after data showed the number of Americans filing new claims for unemployment benefits rose to the highest level in more than a year and a half last week, suggesting the Federal Reserve will halt a year-long rate hike cycle when officials wrap up their two-day meeting on Monday. Wednesday.
However, traders seem reluctant to push the dollar to a weaker level at the start of the new week, as Tuesday's US consumer prices could alter sentiment if inflation continues to pick up.
Analysts at ING stated in a note that: A jump in US jobless claims sent the dollar lower across the board...underlining the extremely high sensitivity of the FX markets to the data at this moment.
The European Central Bank raises rates again, for the time being...
While the USD/EUR currency pair rose to 1.0753, as the European Central Bank is expected to raise interest rates by 25 basis points again when officials meet on Thursday.
However, doubts remain about how far the ECB will hold gains, given eurozone inflation fell faster than expected in May and data last week showed that the bloc's economy entered recession in the first three months of the year.
A 25 basis point rate hike appears to be a done deal at next week's ECB meeting. However, with disappointing growth, an increasingly gloomy economic outlook and subdued inflation, the case for further rate hikes has become weaker.
The Bank of Japan maintains a loose policy
USDJPY rose 0.1% to 139.49, and the Bank of Japan is expected to maintain its ultra-loose monetary policy this week, with a moderate economic recovery expected.
Also, a dovish view of the Bank of Japan is expected to keep the yen under pressure in the coming months, as the gap between domestic and external rates widens.
Elsewhere, USD/GBP rose 0.1% to 1.2575, USD/AUD gained 0.2% to 0.6752, and USD/CNY rose 0.2% to 7.1408, with the CNY declining. to a six-month low of 7.1451 per dollar, as more Chinese state-owned banks began cutting interest rates on yuan deposits.
The move heralds a broader cut in primary lending for the central bank later this month, as it struggles to support economic growth.