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Investing.com – The U.S. dollar edged lower in early European trade Monday, handing back some of its recent gains in holiday-affected trade ahead of the release of the latest Fed minutes for clues of the outlook for U.S. interest rates.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 104.067, remaining close to three-month highs.
Dollar consolidates after recent gains
The Presidents’ Day holiday in the U.S. has limited activity in the foreign exchange markets Monday, and traders have used the opportunity to back some recent dollar gains.
The greenback registered gains last week, its fifth successive positive week, after data showed both U.S. and increased more than expected in January, raising the prospects of the Federal Reserve pushing back the start of its rate-cutting cycle to the start of summer compared with March at the beginning of the year.
The main focus this week will be on the of the Fed meeting from last month, scheduled for Wednesday, while several Fed officials, including Christopher Waller and Raphael Bostic, are also due to speak this week.
Euro edges higher; ECB wage data in focus
In Europe, traded 0.1% higher at 1.0783, trading in a tight range as traders await Tuesday’s ECB survey of negotiated wage rates, and then the release of the flash for February on Thursday.
The ECB’s wage data will be of importance given how much policymakers have warned about high wage growth, even though it is a well known lagging indicator.
“The issue will be how much, if at all, negotiated wages slowed from the prior survey of around 4.7% year-on-year,” said analysts at ING, in a note. “Here, a high figure could raise expectations that the broader wage release in late April will also come in on the high side and finally wipe out the chances (now priced at 36%) that the ECB will cut rates in April.”
traded 0.2% higher at 1.2622, with sterling helped by the slight dollar weakness as well as the spillover from Friday’s data showing U.K. grew at their fastest pace in nearly three years in January.
Yen remains close to key level
In Asia, fell 0.2% to 149.94, flitting around the physiologically-important 150 level as traders remained wary of any potential government action in currency markets.
The yen had tumbled to three-month lows over the past week amid growing conviction that the Bank of Japan will be slow in tightening its ultra-loose monetary policy. Pressure from the prospect of higher-for-longer U.S. interest rates also weighed.
edged 0.1% higher to 7.1986, remaining in sight of a three-month low, although further losses were limited by a strong daily midpoint fix from the People’s Bank of China.
The central bank is also widely expected to keep its benchmark l unchanged on Tuesday, leaving the rate at record lows.
This story originally appeared on Investing
