Asian session review: the US dollar stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, while market participants continued to wonder how many times the Fed will cut interest rates this year.

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 0.03% to 104.64. In May, the index fell by 1.46%, recording the first monthly decline in 2024 on the background of reviewing the prospects for easing the Fed's monetary policy. According to the CME FedWatch Tool, markets see a 14.5% probability of a 25 basis point rate cut at the Fed meeting in July, a 52.1% probability of a rate cut in September, and a 65.9% probability of monetary policy easing in November, with traders pricing in 37 basis points of cuts this year compared with 150 basis points of easing priced in at the start of 2024. This week, investors will focus on the US PMI data, as well as the key report on the labor market, which will be released on Friday. These data will allow for a better assessment of the current state of the economy and provide clues about the Fed's next actions.

The euro was almost unchanged against the US dollar, as investors took a wait-and-see attitude ahead of the announcement of the results of the ECB meeting (on Thursday). Experts believe that the ECB will cut interest rates, as inflation is moving in the right direction and economic growth prospects remain subdued. Policymakers were well informed about the easing of the ECB's policy in June, and experts expect the rate to be cut by 25 basis points. At the same time, policymakers are likely to try to show a certain "hawkish" attitude and caution when providing further guidance on the possibility of additional rate cuts in the future. Since the ECB lowers interest rates earlier than the Fed, the possibility of currency depreciation may contribute to the resumption of inflationary pressures, and this situation is likely to be avoided by policymakers. Expressing caution and dependence on data can be used as a tool to prevent excessive depreciation of the euro due to the fact that the ECB will cut the rate earlier than the Fed. The May consumer price index data, which was higher than expected, should also strengthen the ECB's need for caution. Although the eurozone has made more progress in bringing inflation back to target levels than the US, the May data still suggests that the work is not yet complete.