Written by Kevin Buckland and Alan John
TOKYO/LONDON (Reuters) – The U.S. dollar fell slightly on Monday at the start of an action-packed week for markets, including the British budget, European Central Bank meeting, U.S. jobs report and key political moments in both China and the United States. Deadline.
Bitcoin is also in the spotlight, and after a quiet weekend, large inflows into crypto exchange-traded funds (ETFs), particularly in the US, have pushed it to its highest level in over two years in recent weeks. It rose to more than $4,000.
The euro rose slightly to $1.08455, the pound rose 0.13% to $1.2670, and the Japanese yen fluctuated around the closely watched $1=$150 level. The dollar was last up 0.17% to 150.39 yen.
This left the dollar index against six major currencies flat at 103.78, close to the bottom half of last month's range of 103.43 to 104.97.
“Next week will be a busy week for 'event risk' in the US and Europe, which could trigger some volatility from the current very low levels,” said Lee Hardman, senior currency analyst at MUFG. That's for sure.''
He added that there is a reason why major events do not rattle the market in isolation.
In the United States, Federal Reserve Chairman Jerome Powell testified before lawmakers on Wednesday and Thursday, and on Friday the US jobs report was released, with 200,000 jobs remaining after a jump of 353,000 in January. A steady increase in the number of people is expected.
This week also marks the “Super Tuesday'' US presidential primary election.
“Powell is probably happy with the current market pricing for the Fed's rate cuts, so pay could be a bigger move,” Hardman said. “On the other hand, we expect another strong hiring trend after the last big report.” “If we get that, it could have an impact on market expectations[of Fed policy].”
As of early 2024, markets were pricing in a deep rate cut earlier this year, but traders have since scaled back those views.
Derivative market pricing currently reflects expectations that the Fed's first rate cut will occur in June, leading to three to four 25 basis point rate cuts this year, which will be announced in December. This is not far off from the Fed's forecast.
As expectations for other central banks, particularly the European Central Bank and the Bank of England, have remained roughly in lockstep, currency volatility, partially dependent on changes in interest rate differentials, has been significantly lower and monetary policy This is the lowest level since then. War in Ukraine.
Britain's budget is due to be tabled on Wednesday, with Chancellor of the Exchequer Jeremy Hunt seeking to dampen speculation about big tax cuts ahead of the election. The European Central Bank will meet on Thursday.
Most ECB policymakers are cautious about hinting at rate cuts in the near future.
Hardman said the ECB could push the market ahead of expectations for its first interest rate cut, currently expected in June, at this week's Governing Council meeting after better-than-expected euro zone inflation data released last week. He said he was unlikely to make a statement.
The Swiss franc strengthened after Switzerland's February inflation rate was slightly higher than expected at 1.2% year-on-year, but still below January levels and within the Swiss National Bank's target range. It was well within the 0-2% range.
Currencies regained some of these inevitable gains, with the dollar losing 0.07% against the franc to 0.8824 francs and the euro losing 0.06% to 0.9566 francs.
The Australian dollar fell 0.15% to $0.6516 as traders awaited Wednesday's gross domestic product (GDP) data. China's annual parliament begins on Tuesday, where authorities are expected to announce GDP targets and unveil modest economic stimulus.
(Reporting by Kevin Buckland in Tokyo and Alun John in London; Additional reporting by Ankur Banerjee; Editing by Michael Perry and Bernadette Baum)
