Asian session review: the US dollar stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, while investors continued to analyze the latest US data, which strengthened the likelihood of easing the Fed's monetary policy in September. Meanwhile, experts warn that market liquidity is likely to be low today due to the national holiday in the US.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.03% to 105.30. The US Department of Commerce said yesterday that retail sales rose less than expected in May, as lower gasoline and car prices affected sales at service stations and car dealerships. Retail sales rose 0.1% in May after a 0.2% decline in April. Experts expected an increase of 0.2%. The sales growth trend is slowing down as higher prices and interest rates force households to prioritize basic necessities and reduce unnecessary expenses. Meanwhile, the president of the Federal Reserve Bank of New York, Williams, said that, in his opinion, the US economy is moving in the right direction. He also noted that he expects interest rates to gradually decrease as inflation slows, but declined to say when he would advocate lowering interest rates. According to the CME FedWatch Tool, markets see a 12.4% probability of a 25 basis point rate cut at the Fed meeting in July, a 67.6% probability of a rate cut in September, and a 80.0% probability of monetary policy easing in November.

The pound rose 0.15% against the US dollar after data showed that in May consumer inflation returned to the Bank of England's target (2%) for the first time in almost three years. Consumer prices rose by 2.0% per year, as expected, after an increase by 2.3% in April. The latest reading was the lowest since July 2021. This data appeared ahead of tomorrow's Bank of England meeting. Economists expect the Bank of England to leave the interest rate at 5.25%. But market participants will be closely monitoring any "dovish" forecasts that may indicate a potential start of monetary policy easing in the coming months. Markets are pricing in an about 50% chance of a first rate cut by August and almost 0.5% in monetary easing in 2024.