The dollar pulled back from earlier gains on Monday as investors awaited remarks from Federal Reserve Chair Jerome Powell. Meanwhile, cryptocurrencies rallied on speculation that an attempted assassination on former President Donald Trump has boosted his re-election prospects.
Following the incident, online betting site PredictIt showed increased odds for a Trump victory, with bets rising to 67 cents from 60 cents on Friday. In contrast, President Joe Biden’s odds fell to 27 cents.
The dollar often strengthens under a potential Trump presidency due to expectations of a hawkish trade policy and reduced regulations in certain industries. Trump has also positioned himself as a supporter of cryptocurrencies, although his specific policies remain unclear.
Despite the initial reaction, the dollar’s rise was short-lived. We’re seeing a cooling off from the initial reaction,” said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto. “The market is trying to avoid overreacting. Now, we’re consolidating in early New York trade, with Powell’s discussion at the Economic Club of Washington coming up.”
The dollar index, which measures the greenback against a basket of currencies, fell 0.23% to 104.05, after climbing to 104.31 earlier. The euro edged up 0.09% to $1.0917, while the British pound was almost flat, trading at $1.2989.
Powell is expected to speak at 12:30 p.m. local time (1630 GMT), marking the start of a week filled with commentary from Fed officials. Earlier on Monday, Chicago Federal Reserve Bank President Austan Goolsbee suggested that interest rate cuts might soon be necessary.
Markets are now pricing in a 94.4% chance of at least a 25 basis point rate cut from the Fed in September, according to the CME’s FedWatch Tool. This follows recent data showing that consumer prices fell on a monthly basis for the first time in four years in June.
Against the Japanese yen, the dollar slipped 0.01% to 157.87. The Bank of Japan (BoJ) is believed to have intervened in the market last week to support the yen following the unexpected softness in U.S. inflation data. BoJ data indicates that authorities may have spent up to 3.57 trillion yen ($22.4 billion) to stabilize the currency on Thursday.
Cryptocurrency prices surged, with bitcoin climbing nearly 5% to $62,982 after hitting a two-week high of $63,273. Ether also rose, gaining nearly 6% to $3,364.20.
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