· The dollar was marginally lower against a basket of currencies on Monday, hovering near a 23-month high, as traders await more data to convince them whether to add to their bullish positions in the greenback.
Most major currencies held in tight ranges on light trading volume as Japan began its extended Golden Week holiday. China will observe its Labor Day holiday from Wednesday to Friday. A Federal Reserve policy meeting, Brexit negotiations and a raft of global data including U.S. payrolls could each be the trigger for big currency swings this week.
A swathe of manufacturing surveys from Europe and China are due later this week, along with a first reading on EU GDP.
The U.S. payrolls report on Friday is forecast to show a solid increase of 185,000 jobs in April, with unemployment at 3.8%.
An index that tracks the greenback against the euro, yen, sterling and three other currencies was down 0.16% at 97.85. Last week, it reached 98.330, the highest since May 2017.
The euro was 0.32% higher at $1.1184, while the dollar was up 0.12% at 111.71 yen. The dollar index failed to move higher after data that showed U.S. consumer spending gaining 0.9% in March, marking its biggest monthly increase in more than 9-1/2 years.
· Traders await clues on the Fed’s global economic outlook as the central bank’s policymaking board meets on Tuesday and Wednesday. Analysts do not anticipate any major changes from Fed officials who signaled last month they would not raise interest rates in 2019.
· The Federal Reserve is expected to hold interest rates steady at its policy meeting this week as policymakers balance recent stronger-than-expected U.S. economic growth against sluggish inflation.
Officials have given no signal in recent weeks of any change to the U.S. central bank’s benchmark overnight lending rate, currently set in a range of 2.25 percent to 2.50 percent. Markets have bet heavily the Fed’s “patient” approach means just that - with rates on hold until a run of good or bad news about the economy provides a compelling reason to move.
· Data compiled by CME Group put the odds the Fed leaves rates unchanged this week at 97 percent.
· “We do not expect a big change in tone,” compared to the Fed’s mid-March policy statement, with policymakers likely to be “more upbeat on growth, though with a more cautious reading of recent inflation developments,” JP Morgan economist Michael Feroli wrote in a preview of this week’s meeting.
· Growth in China’s factory activity unexpectedly slowed in April, an official survey showed on Tuesday, suggesting the economy is still struggling to regain traction despite a flurry of support measures.
The official Purchasing Managers’ Index (PMI) fell to 50.1 in April from 50.5 in March, which had been the first expansion in four months, data from the statistics bureau showed. The 50-point mark separates expansion from contraction on a monthly basis.
Analysts surveyed by Reuters had forecast the PMI would be unchanged from March’s reading, pointing to continued but modest expansion.
· Oil prices steadied on Monday, as the market attempted to resume a weeks-long rally that was halted on Friday when U.S. President Donald Trump demanded that producer club OPEC raise output to soften the impact of U.S. sanctions against Iran.
U.S. West Texas Intermediate crude futures ended Monday’s session 20 cents higher at $63.50. Brent crude futures fell 11 cents to $72.04 a barrel.
· The impact of U.S. sanctions on Iran’s economy is dragging on the broader region’s activity, according to the latest economic health check from the International Monetary Fund (IMF).
The organization predicts a 1.7% contraction in the output of goods and services for non-Gulf Cooperation Council (GCC) oil exporters, after already having shrunk by 1.1% last year.
“This is mainly driven by developments in Iran, where the recession is expected to deepen, reducing projected growth by almost 10 percentage points during 2018–20, ” the IMF reported in its 2019 Regional Economic Outlook: Middle East and Central Asia Update, published Monday.
Reference: CNBC, Reuters
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