(Bloomberg) — The dollar's recent gains are at risk of stalling as easing price pressures in the U.S. and China's economic recovery give traders reason to sell.
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Bloomberg's U.S. dollar index fell to a one-month low on Thursday, following a day earlier's report that U.S. underlying inflation slowed for the first time in six months in April. The index has suffered a third straight day of declines, a streak that could end the general upward trend it has been on since the start of the year.
“The dollar could fall in the short term. It's not due to a single factor, it could be due to a thousand dollar devaluation,” said Mingze Wu, a currency trader at StoneX Group in Singapore. . “The impact of US CPI is still being felt.”
Wu also said the US dollar is likely to weaken as risk sentiment improves due to potential appreciation in the renminbi and regional equity gains as the Chinese government moves to support the real estate sector. He added that growing hawkish views on the Bank of Japan will support the yen.
Swaps are pricing in a more than 90% chance that U.S. policymakers will cut interest rates by a quarter of a percentage point by September in response to the latest inflation data. In contrast, as of the end of last week, the market had priced in September's trends with an 80% probability.
But some Fed officials said the central bank needed more concrete evidence of disinflation before cutting rates. Chicago Fed President Austan Goolsby said in a radio interview Wednesday that while he welcomed the slowdown in price increases in April, “there is still room for improvement.”
Yen exits intervention zone due to fall in US yields
Traders will focus on Thursday's weekly U.S. new jobless claims numbers and speeches from Fed officials including Michael Barr, Thomas Barkin and Loretta Mester for clues on the trajectory of U.S. interest rates. right.
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