Euro and pound drop as dollar rises

Both the euro and the British pound dropped nearly 0.2% against the dollar, tracking a broader rebound in the U.S. dollar index

The euro and the British pound edged lower in European trade on Monday as the U.S. dollar staged a modest recovery, clawing back ground from last week’s losses while currency traders locked in positions ahead of a crucial macroeconomic numbers.

Both the euro and the British pound dropped nearly 0.2% against the dollar, tracking a broader rebound in the U.S. dollar index.

The focus centres on a lineup of ECB speakers, including President Christine Lagarde and chief economist Philip Lane. Investors will also digest key incoming economic indicators this week, including Eurozone retail sales, producer prices, and German industrial output for May to gauge if the bloc’s manufacturing sector is turning back.

The U.S. dollar index added almost 0.2%, finding its footing after booking a 0.5% decline last week.

The currency had previously encountered downside pressure following softer-than-expected U.S. nonfarm payrolls data for June. The weaker labour snapshot sparked a debate across local trading desks regarding how much macroeconomic headroom the central bank has to implement additional rate hikes.

However, downside for the dollar was quickly structuralized by persistent hawkishness embedded within the central bank.

Local markets are directing their main focus to Wednesday’s release of the minutes from the central bank’s June policy meeting. The release carries elevated significance as it marks the first major analytical window into the central bank’s communication under its newly instated Chair, Kevin Warsh, who took the helm in late May.

The yen’s USD/JPY pair rose 0.6% to 161.82 yen, remaining close to levels last seen in 1986.

USDJPY remained well above 160 yen– a level that has in the past attracted heavy government intervention. Officials were seen offering verbal warnings on speculation against the yen in recent weeks, keeping markets largely on guard over any intervention.