The dollar index was last down modestly at 104.71
The dollar held steady on Monday, but was set for its first monthly loss this year, as investors were focused on U.S., European and Japanese inflation data to gauge the interest rate outlook in these regions.
Several major currency pairs have touched tight ranges. The euro, which added 0.9% on the dollar last week, was in the middle of a range it has held for over a year at $1.085.
The euro offered little reaction to a survey on Monday that showed German business confidence worsened in May, against forecasts for an improvement.
Trading on Monday was thinned out by holidays in Britain and the US.
German inflation data on Wednesday and euro zone readings on Friday will be watched for confirmation of a European rate cut that traders have pencilled in for next week.
Sterling was testing the top side of a range it has held this year at $1.2735.
Friday’s reading for the U.S. core PCE price index, the Fed’s preferred inflation measure, is expected to be stable month-on-month.
The dollar had dropped after data showed a slowdown in consumer price rises in April and confirming the trend could pull it lower still – but the big picture is that inflation and inflation indicators stay above the Fed’s 2% target.
The dollar index was last down modestly at 104.71. It is on track for a decline of 1.5% in May, the most in one month since December.
A 25 bps cut in September is priced at a 50/50 proposition, with a total of 57 bps of cuts priced by December – so we’d need a big surprise to change that pricing, according to Pepperstone strategist Christ Weston.
U.S. core personal consumption expenditures above 3% could do the trick, and that would get the dollar humming along, while a figure below 2.7% could see relief resonate through markets, he added.
