The US dollar continued to record some volatility and remained below its peak at the beginning of the month on an unclear trend as monetary policy expectations continued to change rapidly.
Last week’s focus on comments from Jerome Powell and other governors of the Federal Reserve has added to the uncertainty around the next steps in monetary policy. This week, the inflation and job market data as well as risks of a government shutdown could fuel volatility.
While the euro remained relatively unchanged during the last few trading days, the currency could be exposed to the downside against its US counterpart.
Markets anticipate this week’s Eurozone CPI data for further context following ECB President Lagarde’s recent comments on inflation levels, despite a notable drop in the region, particularly in Germany.
Expectations of a softer monetary policy as economic conditions continue to worsen and declining inflation could weigh on the European currency over the medium term.
The Japanese yen reached a new low for the year against the dollar, raising risks of a potential intervention by the Bank of Japan. However, the ongoing ultra-loose monetary policy could continue to weigh on the yen’s performance as interest rate spreads remain wide.