The US dollar continued to decline as traders reacted to the US inflation figures which came slightly below expectations and showed a consistent downtrend.
Traders have been monitoring the economic data to anticipate the monetary policy outlook for the remainder of the year in particular after the release of US job market data last week created some uncertainty.
The resulting downward pressures on US treasuries’ yields could also erode the dollar’s attractiveness against other major currencies, most of which could see their central banks continue tightening their respective monetary policies.
Ralph Ratterman, Board Member and Asset Manager at DHF Capital S.A told LondonLovesBusiness.com, “The European Central Bank and the Bank of England in particular are expected to maintain the direction of their current policies and could continue to raise rates.
“The institutions’ stance could continue to push both the euro and the pound up against the dollar. In this regard, the euro could record new highs for this year while inflation in the euro area remains above the 2% goal.
“Similarly, the British pound could continue to accumulate gains as well while the Bank of England takes the necessary steps to secure lower inflation levels. The bank could continue raising its interest rates at a faster pace as inflation stagnated at elevated levels.
The dollar could also continue to lose ground against the yen while the former weakens and the latter benefits from the support of the Bank of Japan.
“The forex market could see additional volatility tomorrow as traders monitor new economic data in the UK, Europe, and the US. Data on economic growth in the UK and the job market in the US in particular could affect expectations.”