The dollar steadied after registering strong gains last week, driven by escalating tensions in the Middle East and expectations of sustained high U.S. interest rates.
While geopolitical tensions could affect the dollar’s performance, waning interest rate cut expectations remain a potent force.
Traders adjusted their projections for Fed cuts to September following a hotter-than-expected consumer price report.
Later today, the dollar could experience a return of volatility upon the release of U.S. retail sales data. February’s retail sales climbed 0.6% month-over-month, falling short of market forecasts and following a significant decline in January, suggesting a potential slowdown in consumer spending.
With market consensus projecting a modest reading of 0.3% for March, ongoing declines in retail sales could put downward pressure on the greenback, limiting its upside momentum.
Meanwhile, the yen continues to perform poorly, hitting its 34-year low against the U.S. dollar. Despite usually benefiting from increased safe-haven demand, the currency found itself overshadowed by gold and the dollar in risk-averse trading.
The yen’s weakness prompted concerns among traders regarding potential currency market intervention by the Japanese government, following repeated warnings from officials in recent weeks. The yen may face further selling pressure later this week, particularly with the release of Japan’s inflation report on Friday, if inflation figures decline.
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