Dollar Stabilizes Ahead of U.S. Economic Data and Rate Cut Expectations

The U.S. dollar held steady on Wednesday, maintaining its position near a two-month low. This stability comes as investors await key U.S. economic data and a monetary policy meeting in Canada, which could trigger a series of interest rate cuts in major economies.

Traders are keenly anticipating the release of U.S. services data on Wednesday and additional job figures later in the week, which could provide further insights into the state of the U.S. economy.

Recent signs of a softening U.S. economy have fueled speculation about earlier Federal Reserve rate cuts, contributing to the dollar’s recent weakness.

The Bank of Canada’s meeting on Wednesday precedes the European Central Bank’s meeting on Thursday, with markets predicting a 75% chance of a rate cut in Canada and a 95% chance in Europe. Both meetings will focus on the economic outlook and potential rate decisions.

The Canadian dollar and the euro remained within their respective months-long ranges, trading at C$1.3678 and $1.0881 per dollar, respectively.

The U.S. dollar index saw a slight increase of 0.11% to 104.92, after briefly hitting a near two-month low of 103.99 on Tuesday.

Brent crude futures hovered near four-month lows, capturing investor attention as they assess the impact of potential rate cuts and economic data on oil prices.

The Japanese yen, weakened by a 25th consecutive month of falling real wages, slipped about 0.6% to 155.90 per dollar, retracing some of Tuesday’s gains. The yen’s performance remains the weakest among G10 currencies this year, prompting concerns from the Bank of Japan about its potential impact on the economy and inflation.

The Australian and New Zealand dollars experienced slight gains due to less dire than expected domestic economic news.

Emerging markets, including the Mexican peso, stabilized after a turbulent period. The peso regained some ground after a sharp decline following the ruling left-wing Morena party’s re-election, which led to a pullback in popular carry trades.