Anna 
On Monday, the dollar maintained stability but faced the prospect of its first monthly decline this year, with investors closely monitoring U.S., European, and Japanese inflation figures for insights into global interest rate trajectories.
Recent foreign exchange activity has been characterized by the pursuit of “carry,” favoring higher-yield currencies and bolstering the dollar. However, fluctuations in U.S. data have introduced uncertainties, challenging policymakers’ confidence in rate projections.
Despite varied economic reports, major currency pairs have largely traded within narrow ranges. The euro, which recorded a 0.9% gain against the dollar last week, remained within a familiar band around $1.085, showcasing resilience amid fluctuations.
Notably, sterling tested its yearly high against the dollar at $1.2735, reflecting ongoing market sentiment and rate expectations.
In the U.S., attention remains on Friday’s release of the core personal consumption expenditures price index, a key inflation metric for the Federal Reserve. While recent data hinted at a moderation in consumer price increases, inflation remains above the Fed’s 2% target.
Amidst this backdrop, the dollar index, gauging the greenback against a basket of currencies, edged down marginally to 104.71. A potential monthly drop of 1.5% in May looms, marking the most significant decline since December.
Analysts suggest that a significant deviation from expected inflation figures could sway market sentiment. A core PCE above 3% may invigorate the dollar, while a print below 2.7% could alleviate market concerns.
Meanwhile, investors continue to seek higher yields, leading to the sale of low-yield currencies like the yen, yuan, and Swiss franc against the euro and dollar. The Swiss franc, in particular, has witnessed a steady decline, touching its lowest point since April 2023.
In Japan, the yen’s trajectory may be influenced by upcoming Tokyo CPI data and government intervention insights. Despite recent gains, the yen remains under pressure, supported by subdued Japanese government bond yields compared to U.S. counterparts.
Additionally, changes in equity-market settlement times in the U.S. could impact currency trading dynamics, particularly in Asia, where investors may need to adjust their strategies.
In cryptocurrency markets, ether experienced a notable surge following unexpected approval for some U.S. exchange-traded fund applications. While further approvals are pending, ether saw a 25% increase against the dollar last week, signaling renewed market optimism.
