During today's Asian trading, the US dollar consolidated against major currencies, remaining near its lowest level since September 6, while investors took a wait-and-see attitude ahead of the Fed meeting.
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) fell by 0.05% to 100.72. Yesterday, the index fell by 0.31%, as the likelihood of aggressive easing of the Fed's monetary policy increased. According to the CME FedWatch Tool, markets see a 67% probability of a 0.5% rate cut in September (up from 34% the week before), and a 33% probability of a 0.25% rate cut (down from 66% the week before). Today, investors will focus on U.S. retail sales data, though all eyes are on the Fed's two-day meeting which concludes on Wednesday. Retail sales surprised with an increase in July, twice exceeding consensus expectations. Total retail sales increased by an impressive 1.0% over the month, while retail sales in the control group showed an increase of 0.4%. Car sales, the largest component of retail sales, were the main driver of growth, as sales of motor vehicles and spare parts rose 3.6% over the month. Grocery and hardware stores made a solid contribution to the increase - their sales increased by 0.9% each. Although the employment report for July was weak, the retail sales report showed that consumers in the economy are still generally resilient. The forecast suggests a continuation of this resilience in August, with some pullback in car sales.
The yen was trading steadily against the US dollar, remaining near the new 2024 high reached yesterday. Investors are preparing for the meeting of the Bank of Japan, the results of which will be announced on Friday. The Bank of Japan is likely to maintain the status quo on Friday, but will signal that it is turning the next meeting in October into a live one.
The pound consolidated against the US dollar as market participants took a break after yesterday's rally and were cautious ahead of the Bank of England meeting (on Thursday). According to forecasts, the Central Bank will leave the rate at 5%, though markets have priced in a 36% chance of another cut.