The USD continued to record some volatility as traders’ expectations regarding monetary policy changed with every new economic data publication.
The currency stabilized to a certain extent during the last few days compared to its previous uptrend while other currencies strengthened, although elevated US yields could keep the dollar on solid ground.
Upcoming data releases and Powell’s comments this week as well as geopolitical developments could also affect the market as traders become more cautious.
The Chinese yuan strengthened to a certain extent after a series of data releases today although it continues to face a strong dollar. The higher-than-expected Chinese GDP and industrial production figures could help limit the downside potential and contribute to maintaining a more stable rate for the yuan.
Similarly, the British pound saw stronger-than-expected inflation figures which could affect the Bank of England’s approach to monetary policy. A more resilient inflation could lead to a more restrictive policy, supporting the currency in the process.
The Japanese yen continued to hover below a resistance, near this year’s peak as traders continue to see a weak yen.
However, the concerns about a Bank of Japan intervention could leave the currency without any significant developments against its US counterpart.