Stumbling in its battle for supremacy, the dollar weakened against most major currencies on Tuesday as markets braced for key US and eurozone inflation figures due late this week, reports Forbes.

Forex News Today: Overview

The greenback is heading for its first monthly drop in 2023.

According to Athanasios Vamvakidis, the global head of forex strategy at BofA, ‘weaker data on the US economy, and stronger than expected data on the eurozone are the two main reasons.’

The spending bill has not helped, he says since it ‘gives support to arguments that the Fed is done tightening rates’. 

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Forex News Today: Market Sentiment and Rate Cuts

Financial markets are betting on a rate cut in December by the US Federal Reserve, with an 80% probability of the coming November cut and 60% for September.

The dollar index, a measure of the greenback against a basket of currencies, was 0.09% lower at 104.47, a 1.76% decline for the month.

The dovish comments of European Central Bank policymakers helped the euro rise 0.13% to $1.0872.

Forex News Today: ECB Expectations

 And, as expected, the president of ECB, François Villeroy de Galhau, appeared to confirm market views that a rate cut is possible on 9 July (we’re almost certainly going to get one unless a devastating shock hits Europe next week).

But markets have drastically scaled back their expectations for future ECB moves after seeing the Fed raise rates by another 75 basis points on Wednesday.

They now expect the ECB will cut rates only three times, not five, through the end of next year and into early 2025.

We’ll soon get two more hints from markets as to when the ECB will next step in. Germany’s inflation data will be released on Wednesday, with the broader eurozone reading the next day.

Forex News Today: U.S. Consumer Confidence

 With news of a surprise rise in US consumer confidence this month slightly propping up the dollar, data is in second billing to the number one story of the day for the markets on Friday, the report for May, due at 1330 GMT, on the US core personal consumption expenditures (PCE) price index.

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This is the US central bank’s preferred measure of inflation, and analysts see it printing flat on a month-on-month basis.

The implications of any upside surprise in US data remain an interesting area of analysis, with markets seeming to be well-priced for benign data.

Forex News Today: Neutral Policy Debate

Derek Halpenny, head of research, global markets EMEA at MUFG Bank, said: “Higher inflation expectations are likely to be accompanied by a heightened sensitivity to stronger-than-forecast incoming data given the more intense debate regarding the Fed’s implied neutral stance.”

Fed governor Christopher Waller last week suggested that a key underlying growth rate known as the R-Star has begun rising rather than falling after many years of disinflation.

A rising R-Star could exert upward pressure on market yields if the economy does not slow as expected.

Forex News Today: Dollar-Yen Dynamics

The dollar/yen pair traded around 157, most recently at 156.92, flat on the day.

Vamvakidis said a Fed rate cut in 2024 would likely push the yen back above parity with the greenback.

But if the Fed starts easing policy in 2025, the yen could once again approach the 160 level, triggering more intervention action from the Japanese authorities.

The Bank of Japan’s (BOJ) leading and coincident gauges of underlying inflation both fell short of 2% in April. This uncertainty made the timeline for its next rate hike more uncertain.

Forex News Today: Sterling and the New Zealand Dollar

Sterling and the New Zealand dollar each reached more than two-month highs at $1.2772 and $0.6151, respectively, while the Australian dollar also edged 0.12% higher.

Australian monthly consumer price index data will be released on Wednesday.

Bitcoin dropped 2.41% to $67,908, and ether fell 1.28% to $3,838.80.

Forex News Today: Global Equities and Treasury Yields

An index comprising global equities eased a touch on Tuesday and Treasury yields edged higher as investors waited for the release of inflation data later in the week that would indicate the US interest rate outlook.

US consumer confidence jumped in May, suggesting optimism about the US jobs market after three straight months of decline in April.

Earlier data showed that US house price growth slowed markedly in March amid higher mortgage rates Meanwhile, UK average weekly earnings excluding bonuses rose less than anticipated in the three months to March.

Forex News Today: Key Inflation Data

Investors are waiting on the release of the U S core Personal Consumption Expenditures Price Index for April on Friday, with expectations that the Fed’s preferred inflation gauge will remain flat for the month.

“We do need real interest rates to start coming down, and slowing inflation will hopefully lend the Fed that cover to get rates down towards zero,” said Kim Forrest, chief investment officer at Bokeh Capital Partners.

Forex News Today: Market Performance

The Dow Jones Industrial Average on Tuesday fell by 160.86 points, or 0.41%, to close at 38,908.73; the S&P 500 fell by 0.90 points, or 0.02%, to close at 5,303.82; and the Nasdaq Composite rose by 66.46 points, or 0.39%, to 16,987.26.

European data on inflation is due for release throughout the week.

Forex News Today: Treasury Market Dynamics

Yields fell back after the house price data but firmed up again after the consumer confidence survey.

Tuesday’s supply onslaught in the Treasury market will see the auction of $69 billion in new US two-year notes and $70 billion in Treasuries on the five-year note maturity.

US 10-year yield rose 1.4 basis points to 4.487%. The 30-year yield rose 3.3 basis points to 4.6104%.

The 2-year yield, which usually moves most closely in tandem with moves in interest-rate expectations, fell by 2.4 basis points to 4.9289%.

Forex News Today: Currency Movements

The dollar index — the greenback’s measure against a basket of currencies that includes both the Japanese yen and the euro — fell 0.09% to 104.47.

Meanwhile, the euro rallied 0.12% to $1.0871, and against the Japanese yen, the dollar ticked up to 156.87.

Global oil prices moved up as well; U.S. crude gained 2.26% to $79.48 per barrel and Brent crude improved 0.84% to $83.8 per barrel. 

Forex News Today: Precious Metals

Gold prices held overnight gains, as a slight pullback in the dollar kept bullion supported ahead of U.S. inflation data due later on Friday.

Spot gold added 0.18% to $2,354.98 an ounce, and U.S. gold futures rose 1.17% to $2,359.70 an ounce.

Forex News Today: Sterling Performance

Sterling hovered at multi-month highs against the euro and soared to a two-month peak versus the dollar, boosted by hopes that the central bank will raise interest rates, as well as increased risk-taking by investors.

Global inflation print will yield hints over the direction of interest rates around the world.

Does cheaper money act as a powerful incentive for a pound at risk?

This week, the inflation figures for the world’s largest economies could provide a clue about the direction of interest rates across the globe.

This week, Germany’s inflation figures are due on Wednesday, eurozone figures arrive on Friday, and the US will be publishing its core PCE price index at the end of the week as well.

Forex News Today: Market Sentiment on Sterling

Sterling left $1.2768, having earlier touched $1.2783, a peak not seen since 21 March.

The euro climbed 0.14% against the sterling to 85.14 pence per euro as analysts said upward pressure on inflation from the services sector in April, and other economic data, had tilted the Bank of England’s first cut in interest rates from Wednesday firmly into August.

Forex News Today: UK Political Landscape

Resignations by British Prime Minister Rishi Sunak’s lawmakers are now higher even than those preceding the Conservative Party’s drubbing in the 1997 election.

Yet investors don’t expect the result of the 4 July UK general election to bring much movement in British sterling.

Both Labour and the Conservatives have promised to stick to the fiscal rules overseen by the Office for Budget Responsibility.

Forex News Today: Indian Rupee Movements

The Indian rupee remained stable on Tuesday as traders expect to see the currency trade in a tight range until India’s general election result.

The partially convertible rupee was at 83.1325 per dollar by 3:13 pm in Mumbai, little changed from its previous close.

Barring some surprises ahead of the election results, the rupee is expected to mostly trade sideways on increased volatility, analysts said.

Forex News Today: Asian Currency Trends

The greenback index, meanwhile, fell 0.1% to 104.4 even after most Asian currencies gained, with the Korean won rising 0.6%.

Flows driven by equities are likely to be reflected in rupee moves closer to the election results.

Of the estimated $2 billion in passive inflows, on account of the MSCI Global Standard index’s rejig, some flows might even come in earlier.

Forex News Today: Fed Rate Expectations

Later on Tuesday, the market will eye remarks from Federal Reserve speakers for signs of where the central bank’s policy bias lies: the odds of the Fed leaving rates on hold in September have risen to 50% from about 38% a week earlier, according to the CME’s FedWatch tool.

Forex News Today: Roundup.

The dollar got weaker against most major currencies as markets braced for Wednesday’s hotly-anticipated U.S. and eurozone inflation series that could enact changes in the monetary policy of the Federal Reserve and the European Central Bank, respectively.

Sterling and the New Zealand dollar neared fresh two-month highs, while the dollar index shed 0.09%. Improved month-on-month US consumer confidence helped the greenback eke out small gains.

Global oil prices climbed amid an expected crude stock-build in the U.S. Treasury yields moved higher, while gold went nowhere.

Major currencies: The pound has been up and down this week, but still reached an 18-day high as sterling triggered a short-covering bounce.

Investors remain confident that the Bank of England will cut its base rate, and will extend its quantitative easing program if Brexit takes a toll on the fragile British economy.

The New Zealand dollar gained as risk appetite held firm.

Global equities: The top shelf of global equities rebounded early on Thursday but rather quickly fell back into the red by afternoon.

Higher and higher European inflation data did not seem to help either MSCI’s Europe index or the SPDR S&P Eurozone ETF.

Volatility: The plunge in global equity volatility has continued as investors have turned a blind eye to Europe’s rising inflation numbers.

The VIX volatility index, which gauges S&P 500 options activity, stood at 13.85 compared with 15 at the same time last week.

VIX futures also traded below the spot index. The CBOE volatility index, which tracks options on the S&P 500, declined to 15.58. It also traded well below spot levels.

Commodities:

Gold held steady at $1,284 an ounce as the dollar was rocked by worries about inflation.

Silver followed it down by a penny, to $14.94 an ounce.

Oil traded up slightly as US crude stocks expanded at a much slower rate announced by the American Petroleum Institute.

The author says it’s oil’s fourth weekly gain. Brent crude and US West Texas Intermediate were both up slightly by $1.06 at $68.94 and $61.13.

Agricultural: U.S. soybean farm futures prices continue to fluctuate wildly between highs of $9 a bushel and lows of $8.60, just like they have every day for nearly 2 weeks.

Forex News Today: Key Highlights

Market Sentiment Rate Cuts Anticipated Anticipation of U.S. rate cuts prompted further erosion of the greenback, with the dollar index dropping another 0.09%.

ECB EXPECTATIONS: Forex news reported earlier that the ECB is predicted to make a rate cut in the next meeting. German and eurozone inflation data are to be published this week.

U.S. Consumer Confidence: Forex news today indicates improved U.S. consumer confidence, boosting market optimism.

The higher medium-term macroeconomic growth rate implied in the Fed’s latest announcement – as opposed to the summer lows – has become a critical concrete aspect of the Fed’s implied ‘neutral’ policy stance.

Likewise, current market yields reflect those economic growth rate estimates. So what’s it all about?

Well, if the Fed is contenting itself with ‘neutral’, to say that the Fed isn’t pushing either towards monetary expansion (which would then allow the positive feedback cycle to kick in) or towards recession (in which case the bubble would be allowed to deflate) is indeed to say something rather important.

Short-term Dollar-Yen Dynamics: According to forex news today, the yen to dollar cross remains in focus due to expectations of a Fed rate cut. 

Sterling tops multi-month highs; the NZ dollar powers higherSterling and the New Zealand dollar hit multi-month highs Tuesday against the backdrop of strong risk appetite and buoyant commodity markets.

Crucial Data On Inflation: This Forex News Today Highlights Upcoming US Core PCE Price Index And How It Will Impact Markets. 

Precious Metals: Forex news today shows gold prices holding steady amid dollar movements.

 Indian Rupee Movements: Forex news today has a look at the range-binding of the Indian rupee as election results inch closer.