Investing.com – The US dollar slipped lower on Monday, but remained near a three-week high ahead of the final Federal Reserve policy meeting of the year, while the euro weakened after regional economic activity data.
At 05:35 ET (10:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 106.580, after rising nearly a three-week high on Friday.
A dollar brings some benefits back
The dollar has given back some of its recent gains as traders position for an interest rate cut on Wednesday, with the Fed widely expected to cut its target policy band by 25bp to 4.25-4.50%.
“There will be more interest as the Federal Reserve prepares to explain that it will meet in January. The Fed's new projections should also reduce the number of rate cuts expected in 2025 to three from four. This is all being priced in by the market right now, but there seems to be little reason for the Fed to spring a big surprise this week and we see the dollar holding support to it,” analysts at ING said in a note.
Euro slips after PMIs
In Europe, it slipped slightly lower to 1.0499, after the release of data showing the euro area's business activity down again this month, although there was a sign of economic progress.
The HCOB index, compiled by S&P Global, rose to 49.5 in December from 48.3 in November but was still shy of the 50 mark separating growth from contraction.
The bloc's core services industry bounced back to growth, largely offsetting a long-term decline in manufacturing.
A variety of European Central Bank speakers are due to speak this session, after the central bank cut interest rates once more last week, including Head ECB chair Christine Lagarde, Pierre Wunsch and Isabel Schnabel.
“The latter two are coming more from the hawkish side and there could be upside risks to EUR/USD if they push back against sub-neutral monetary policy levels,” ING said.
traded 0.3% higher to 1.2652, bouncing back from the previous week's losses after data showed the UK economy surprisingly contracted in October.
They hold their latest policy meeting on Thursday, which is expected to cut interest rates by 25 bps even with the gradual approach to easing.
Yuan is suffering from economic weakness
In Asia, it rose 0.2% to 7.2899, hovering near a two-year high after releasing more disappointing economic data.
Chinese grew as expected in November as recent stimulus measures from Beijing supported business activity.
China's home prices eased slightly in November, marking the slowest fall in 17 months, and in November they were well below forecasts, reflecting continued weakness in consumer spending. -use despite policy support.
it gained 0.1% to 153.70, as Reuters said the Bank of Japan was likely to keep interest rates unchanged this week, compared to earlier expectations for a hike.
