Dollar Rebounds as CPI Data from China and the US Affects Market Nerves
Investing.com – The U.S. dollar index strengthened in the European morning session on Monday as the focus turned to inflation data from the world‘s two largest economies. The dollar rebounded from a one-week low against a basket of currencies, rising 0.28% to 102.123 after falling to a low of 101.73 on Friday. The benchmark U.S. Treasury yield was at 4.096%.
The dollar initially fell after weaker-than-expected U.S. data for July was released on Friday. However, the employment report also showed signs of stability and a decline, indicating that the labor market remains tight and inflationary pressures persist. With the Federal Reserve’s focus on economic data ahead of its September policy meeting, all eyes will be on Thursday’s key inflation data. If inflation falls, policymakers may choose to hold off on raising interest rates in September, although a rate cut is unlikely given that inflation is still expected to be as high as 4.7% in July.
In addition to the CPI data from the US, China will also release its inflation data this week. The yuan weakened as investors anticipate that China’s data could show a decline in CPI to -0.5% on an annualized basis. This could indicate that the Chinese economy is struggling and raise concerns about how China will stimulate further economic growth.
The euro tumbled as German industrial output slumped by 1.5% in June, far below last month’s revised 0.1% decline. The weakness in Germany, the largest economy in the eurozone, may prompt the European Central Bank to pause its tightening cycle in September, despite raising interest rates earlier this month.
Meanwhile, in the UK, house prices fell for the fourth consecutive month in July, down by about 0.3% and 2.4% year-on-year. The UK’s second-quarter GDP data is set to be released on Friday, and although the economy is expected to show slight growth, it indicates that the overall economy remains stagnant.
Despite warnings from Bank of Japan members that inflation may exceed expectations this year, the yen rose to 142.24.
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Compiled by Liu Chuan.