Dollar edges higher, with all eyes on the Federal Reserve By Investing.com

Investing.com – The US dollar rose in early holiday-affected European trade on Monday, at the start of a week that includes policy-setting meetings from the Federal Reserve and European Central Bank, as well as the monthly US jobs report.

At 02:05 ET (06:05 GMT), the greenback, which measures the greenback against a basket of six other currencies, was trading 0.2% higher at 101,570.

The highlight of the week will be the closing of the GNSO’s latest meeting, which is expected to raise its benchmark lending rate target by another 25 basis points on Wednesday — the 10th consecutive increase dating back to March of last year.

However, this could be the end of the Fed’s tightening cycle as last week’s Q1 numbers indicated the economy is slowing too quickly.

In addition, the weekend sees the release of US monthly data, which is expected to show that the economy added 180,000 jobs. While still a strong number, it marked the third consecutive month of moderate job growth.

Data from the Commodity Futures Trading Commission late last week showed that, with the Fed expected to be more aggressive than the Fed in the coming months, speculators have consolidated their net bearish stance on the dollar against its major peers the most since June 2021.

The European Central Bank also meets this week, on Thursday, when policymakers also expect to sanction another rate hike, although the size of the increase remains in doubt.

Tuesday’s data on the Eurozone could be the deciding factor, as underlying price pressures are likely to remain uncomfortably high, suggesting a 50bp rate hike.

However, if bank lending data shows that credit conditions have become significantly tighter, the case for rate hikes will be strengthened even less.

“The ECB’s dilemma will be between viscous core inflation calling for further interest rate hikes, and recent events in the banking sector that call for scaling,” analysts at Morgan Stanley said in a note.

“The solution, in our view, would be a compromise, involving a 25 basis point hike and a reactivation of forward rate guidance, closely linked to the data coming in.”

It fell 0.1% to 1.1006, with activity likely to be limited given the majority of Europe enjoying the Labor Day holiday.

It fell 0.2% to 1.2553, in a quiet week in the UK, with officials entering a period of blackout ahead of their May 11 decision.

It rose 0.4% to 0.6635, and rose 0.5% to 136.94, while trading largely flat at 6.9121.