(MENAFN) On Monday, the dollar exhibited overall stability, buoyed by data indicating a drop in inflation within the United States. This trend further solidified expectations among investors that the US central bank might opt for an interest rate cut come June. Meanwhile, the yen experienced fluctuations, hovering around the 152 level against the dollar, triggering concerns among traders about potential government intervention to stabilize currency dynamics.
Recent figures from the US Department of Commerce's Bureau of Economic Analysis underscored the inflationary slowdown, with the personal consumption expenditures price index registering a modest 0.3 percent increase in February. This figure fell short of economists' projections, which had anticipated a rise of 0.4 percent, as indicated by a Reuters poll. However, the report also revealed an uptick in consumer spending during February, marking the most substantial increase in over a year and affirming the underlying strength of the American economy.
Notably, Friday's release of economic data coincided with widespread closures across most global markets, with European markets remaining shuttered on Monday. Against this backdrop, Jerome Powell, Chairman of the Federal Reserve, offered insights on the latest inflation data, expressing satisfaction with its alignment to the central bank's objectives. Powell's remarks echoed sentiments expressed following the bank's monetary policy meeting the previous month, reinforcing the notion of a deliberate and cautious approach to monetary policy adjustments.
Market sentiment, as reflected by the CME Group's "Fed Watch" service, suggests growing anticipation of an interest rate cut by the US central bank in June. The probability of such a move currently stands at 68.5 percent, up from 57 percent recorded at the close of the previous week. Moreover, traders are increasingly betting on a cumulative reduction of 75 basis points in interest rates over the course of the year, signaling expectations for proactive measures to stimulate economic activity amidst evolving market conditions.
In summary, amidst indications of declining inflation in the United States and corresponding expectations of a potential interest rate cut by the Federal Reserve, the dollar maintained its stability on Monday. Concurrently, fluctuations in the yen, particularly around the 152 level against the dollar, prompted concerns among traders, highlighting ongoing scrutiny over currency dynamics and potential government interventions.
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