Asian session review: US dollar has stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, while investors took a wait-and-see attitude ahead of the release of important inflation data.

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 0.04% to 101.39. As for the data, the core personal consumption expenditures (PCE) index - the Fed's preferred inflation measure - will be presented at 12:30 GMT. Consumer spending remains high despite the weakening of the labor market. Retail sales increased by as much as 1.0% in July, which in dollar terms accounted for 25% of the total increase over the previous two years in one month. The latest quarterly services report also suggests that service consumption was even stronger in the second quarter than previously estimated. Experts expect that personal spending increased by 0.5% in July, which will be the fastest pace in four months. Although inflation has somewhat withdrawn from economic discussions, it is still important for the trajectory of the Fed's monetary policy. Based on previously published consumer and producer price reports, both the overall and core PCE are expected to have increased by 0.2% in July. Meanwhile, personal income is projected to have increased by 0.2% in July, which is weaker than spending and suggests a further drop in the level of personal savings, which has already fallen to its lowest level in 18 months in June. In general, consumer spending is expected to decline in the second half of the year amid a weakening labor market, which will lead to a slowdown in wage growth. But households have defied expectations before. To the extent that households will continue to spend, this will lead to further deterioration in savings and thus make consumers more financially vulnerable over time.

The euro was trading near a 2-week low against the dollar, as the latest inflation data from Germany and Spain strengthened the arguments in favor of easing the policy of the European Central Bank. Meanwhile, the eurozone CPI report for August will be released later today (at 09:00 GMT). As of July, overall inflation was 2.6% year-on-year, which is not far from the target level. Most of the disinflation in the eurozone occurred in the goods sector, not in the services sector. However, ECB officials concluded that sufficient progress had been made to move towards a more accommodative monetary policy. At the moment, it is believed that inflation in the eurozone will continue to develop in a way that will allow the European Central Bank to lower interest rates. According to experts, ECB policymakers will be satisfied enough with disinflation trends to lower interest rates again in September. Going forward, ECB policymakers may still exercise some caution to guard against any lingering inflationary pressures, but a measured approach to rate cuts is likely to remain in place until the end of 2025. If inflation declines in August, ECB policymakers will eventually feel more comfortable with a rate cut in September and maintain their inclination to ease policy until the end of next year. According to forecasts, the CPI rose by 2.2% per annum in August after an increase of 2.6% per annum in June.