USD firmed slightly against most of its major rivals in the European session on Monday after volatile trading last week as investors continued to weigh interest rate cut prospects and geopolitical risks.
The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged up 0.01% from the previous close to 106.16.
The absence of further aggravation from Iran following Israel’s retaliatory strike allowed it to ease slightly geopolitical concerns.
Earlier this month, data, showing sticky inflation in the U.S. along with continued economic strength, compelled markets to reduce their expectations of interest rate cuts from the Federal Reserve. According to the CME FedWatch Tool, markets now fully price in just one rate decrease in 2024. The move is now anticipated to come in September at the earliest - later than the European Central Bank (ECB) and the Bank of England (BoE), both of which are expected to start policy easing by mid-year.
Later this week, investors will receive two crucial economic indicators - the first estimate of the U.S. first-quarter GDP growth on Thursday and the March reading of the Fed's preferred core PCE inflation measure on Friday - which could cause a revision of rate bets.