- Investors increased their bets on the Fed maintaining its aggressive policy for longer.
- ECB’s Visco said on Saturday that the ECB must refrain from aggressive hikes.
- The British economy contracted in the last quarter of 2022.
During an earlier London session trading on Monday, investors increased their bets on the Federal Reserve’s plan to maintain its restrictive monetary policy for a longer period, causing the dollar to reach a five-week peak while most major currency futures dipped. However, during the start of the New York session, the US dollar lost most of its gains.
This week’s main event will be the American consumer price data publication on Tuesday, influencing expectations for the Fed’s stance.
A positive US CPI number would likely boost the dollar since it would raise hopes that the Federal Reserve will adopt a tighter monetary policy.
After shocking many with a hawkish shift on interest rate hikes, Australia’s top central banker will face a grilling during parliamentary hearings this week.
Philip Lowe, RBA governor, appears before MPs on Wednesday and Friday during hearings about the bank’s anti-inflation strategy. This will likely affect Australian dollar futures.
The central bank added insult to injury by signaling that further rises will be required after last week’s increase to control inflation.
Euro futures fell after a key Italian policymaker said on Saturday that the ECB must refrain from raising interest rates aggressively, given the euro area’s degree of private and public debt.
Ignazio Visco, a member of the ECB Governing Council and the governor of the Bank of Italy, added that he did not think a recession was unavoidable to lower inflation.
The pound extended losses on Monday as data on Friday revealed that the UK economy shrank in the last quarter of 2022, averting a technical recession but recording no growth.
December was characterized by extensive rail strikes and unfavorable weather. The UK’s gross domestic product contracted by 0.5%, more than was anticipated (0.3%), according to the Office for National Statistics.
Yen futures were on the back foot as traders reevaluated their views of the policy stance of the probable new governor of the Japanese central bank, who will be formally introduced on Tuesday.
Kazuo Ueda, a former Bank of Japan board member, is expected to take over as governor. Ueda stated in an interview on Friday that it was reasonable for the BOJ to keep its current ultra-easy policy.
Despite all that is happening in major economies, the focus remains on the US inflation data that will likely cause a lot of volatility for currency futures.