The dollar index (DXY) fell by 0.28% on Monday, settling below last Friday’s 2-week high, following comments from U.S. Treasury Secretary Bessent suggesting the Fed may not raise interest rates in response to supply shocks. The probability of a 25 basis point rate hike at the next Federal Open Market Committee (FOMC) meeting on September 15-16 increased to 65% from 36% after Fed Chair Warsh’s recent remarks on persistent inflation.
In economic data, China’s August manufacturing PMI rose to 49.8, surpassing expectations of 49.5, while the non-manufacturing PMI remained unchanged at 49.0, weaker than the forecast of 49.4. Meanwhile, German August consumer prices rose by 0.2% month-over-month and 2.9% year-over-year, below expectations of 0.3% and 3.1%, respectively, contributing to speculation of an ECB rate hike.
Japan’s July industrial production unexpectedly rose by 0.1%, defying forecasts of a 0.7% decline, while retail sales jumped by 2.4%, surpassing expectations of 1.6%. The market anticipates an 84% chance of a 25 basis point Bank of Japan (BOJ) rate hike at its upcoming policy meeting.
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