The dollar index remained flat after a rebound last week as traders reacted to higher-than-expected US inflation data.
The currency could find support as expectations point to the Federal Reserve maintaining interest rates at elevated levels for a longer duration while at the same time, US treasury yields rose significantly.
However, the dollar could remain muted as market participants now await the Fed’s upcoming policy decision later this week which is widely expected to maintain benchmark interest rates unchanged at 5.5%.
Likewise, the euro traded relatively flat after weakening to a certain extent last week as traders look forward to the Euro Area CPI release which could fuel some volatility.
At the same time, traders could remain cautious this week ahead of the Federal Reserve, Bank of Japan, and Bank of England interest rate decisions which could affect expectations and market direction. An end to the Bank of Japan’s negative interest rates could bolster the yen which has been under pressure from a stronger dollar.
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