Title: Dollar Slips as China Leaves Rates Unchanged; Euro Shrugs Off Macron Defeat

Jun 20, 2022 02:52AM ET

By: AnalysisWatch

The dollar weakened in early trading in Europe on Monday, not receiving much support from rumors of another 75 basis point rate hike by the Federal Reserve at its next meeting.

At 3 a.m., the dollar index, which tracks the greenback against a basket of advanced economic currencies, was 0.3% lower at 104.20, but that represented only a small consolidation from Friday's 19-year high.

Risk sentiment was supported by the People's Bank of China's decision not to cut its benchmark interest rate from 3.70% overnight, even though inflationary pressures had eased significantly in recent weeks and unemployment had increased. The offshore yuan subsequently rose 0.4% to 6.6836.

On Sunday, Fed Governor Christopher Waller said he was "all in" to lower inflation and was open to another 75 basis point rate hike when the Fed meets again in July. He ruled out the more extreme scenario of a 100 basis point hike, warning that markets would suffer a "heart attack."

Waller is known as an inflation advocate, and his rejection of a full-point hike was taken as a sign that there will be no consensus for such a move in the foreseeable future, although both Treasury Secretary Janet Yellen and Waller's Fed counterpart, Loretta Mester, have said inflation is likely to remain high for the rest of the year. Due to the holiday in the US, trading in the dollar will be subdued on Monday anyway.