The U.S. dollar drifted lower on Monday at the start of a data-packed week, while the British pound rose as some confidence returned to British consumers.
As of 04:00 ET (09:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 103.262, heading for a monthly loss of about 3%, its worst performance in a year.
The dollar has been on the back foot for most of this month on growing expectations that the Federal Reserve could start cutting interest rates next year after likely ending its rate-hiking cycle earlier this month.
These hopes were largely driven by October’s unchanged reading on consumer price inflation, and traders will be looking to another U.S. inflation report on Thursday to bolster the case for an end to the Federal Reserve’s rate hikes.
The Fed’s preferred inflation gauge, the personal consumption expenditures price index, is expected to have risen 0.1% in November, down from a 0.4% increase in September, which matched August’s rise.
The core reading, which strips out food and fuel costs and is considered a better measure of underlying inflation, is expected to have risen 3.5% year-on-year.
Pound Gains on Return of Consumer Confidence
In Europe, GBP/USD rose 0.1% to 1.2616, climbing to a more than two-month high, helped by a reading of consumer confidence on Friday that showed people in Britain became more optimistic about the outlook for the economy and their personal finances this month.
The Bank of England kept interest rates on hold for a second straight meeting earlier this month as inflation fell to 4.6% in October from over 11% just over a year ago.
However, getting inflation down to the central bank‘s 2% target will be “hard work,” Bank of England Governor Andrew Bailey said in an interview published early Monday, as most of the recent decline was due to the unwinding of last year’s surge in energy costs.
EUR/USD rose 0.1% to 1.0941, as sentiment among German exporters improved in November, according to an Ifo survey released on Monday.
The institute’s export expectations indicator rose to minus 3.8 points in November from minus 6.3 points in October.
“However, the export economy still hasn’t managed to develop any momentum,” said Klaus Wohlrabe, head of the Ifo survey. “German companies have yet to benefit much from the economic upturn in many countries.”
Data released Friday showed Europe’s largest economy shrank 0.1 percent in the third quarter from the previous three months.
Profits at China’s industrial firms extended gains for a third month in October, albeit at a slower pace, data showed on Monday, but all eyes this week are on November PMI data due on Thursday for more clues on business activity.
USD/JPY traded 0.2% lower at 149.08, with the Yen among the day’s better performers ahead of this week’s Japanese industrial production and retail sales data.
AUD/USD was up 0.3% at 0.6600, ahead of key inflation and retail sales data due later in the week. Reserve Bank of Australia Governor Michele Bullock is also scheduled to speak this week.