The dollar declined because the market's understanding of the Fed's monetary policy and US economic data was still volatile. This week, US inflation data will be in the spotlight.
The US dollar weakened 0.16% to 94.06 in the trading session Monday (08/November) evening, after touching a 15-week high on the US NFP data last week.
Investors are still in the process of digesting economic reports and the Fed's plan to start tapering this month.
In announcing the results of the FOMC meeting last week, the Fed still stated that the current rising inflation would only be temporary.
Nevertheless, the US central bank continued to start tapering although the interest rate hike would have to wait for further developments in the employment sector.
The next day, the US Employment data released improved. US Non Farm Payrolls rose higher than expected.
The addition of 531,000 jobs in October was achieved thanks to the easing of the impact of COVID-19 on economic activity in the US.
In the fourth quarter, the US economy is projected to be optimistic to regain momentum.
"The market is digesting the information we shared last week. Both the Fed's monetary policy statement and Friday's US NFP data, both still highlight the fact that the Fed is removing liquidity and is expected to raise interest rates next year," Bipan Rai said. , forex expert from CIBC Capital Markets.
The Fed's Clarida Comments With Powell
Rai also touched on comments from Fed Vice Chairman Richard Clarida today, who said that the central bank could change its benchmark for rate hikes next year.
Clarida admits that US inflation has risen higher than it should have been.
However, in line with Powell, he still believes that this will only be temporary.
"The outline of her (Clarida's) thinking is similar to what we heard from Powell last week. Their statement has the sense that there is indeed a slightly higher risk of inflation," Rai commented.
Therefore, the Fed is expected to use a wait-and-see approach in the future.
They will continue to keep an eye on inflation, with Consumer Inflation (CPI) data due for release on Wednesday.
Meanwhile, Powell is also scheduled to give a speech tonight.
However, the content of Powell's speech is not related to monetary policy, so it has no impact on the performance of the US Dollar.
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