16.02.202601:59:00UTC+00Dollar Holds Steady in Thin Holiday Trade

The dollar index hovered just below 97 on Monday, trading sideways in thin holiday conditions as US markets were closed for the Presidents’ Day observance. The greenback had come under pressure last week after softer-than-expected US inflation data strengthened expectations that the Federal Reserve will cut interest rates later this year.

The annual headline inflation rate eased to 2.4% in the latest month, down from 2.6% in each of the previous two months and below the consensus forecast of 2.5%. On a monthly basis, consumer prices rose 0.2%, moderating from 0.3% and undershooting expectations for an unchanged 0.3% reading.

At the same time, earlier data showed US nonfarm payrolls posting their largest increase in more than a year, while the unemployment rate unexpectedly declined, pointing to a stabilizing labor market. Money markets now largely price in a first Fed rate cut in July, with a significant probability of an earlier move in June.

Investors are now looking ahead to the latest Federal Reserve meeting minutes, the fourth-quarter GDP release, and the Fed’s preferred inflation gauge—the core PCE price index—for additional signals on the future path of monetary policy.