The dollar began the week with low volatility in the early session, as traders continue to assess the Federal Reserve’s monetary policy outlook amidst indications of cooling inflation.
Last week, the greenback retreated against a basket of major currencies, with the dollar index dropping by about one percent. Signs of declining US inflation reinforced expectations of forthcoming interest rate cuts. Recent data revealed that April’s US consumer prices rose less than forecast, prompting the market to forecast a start in monetary easing in September.
However, several Federal Reserve officials continue to advocate for caution regarding rate cuts and have stressed the need for more data before considering rate adjustments. Key upcoming events include the release of the Personal Consumption Expenditures (PCE) price index report on the last day of May.
Furthermore, on Wednesday, the dollar could experience increased volatility after the publication of the Fed’s meeting minutes, which are anticipated to provide additional guidance on future rate decisions.
