Investing.com - The U.S. dollar retreated from a one-week high on Monday, surrendering a portion of its explosive post-jobs report rally ahead of a critical U.S. inflation reading and a heavy slate of central bank speeches.
The pause in the greenback's momentum allowed the euro and the Japanese yen to claw back ground following Friday's violent market repricing.
The U.S. Dollar Index slipped 0.4% to 101.88, cooling off after logging its largest single-session advance since September on Friday. That prior surge had been ignited by a blowout U.S. non-farm payrolls report, which showcased a highly resilient labor market and forced investors to rapidly pull forward expectations for tighter monetary policy.
With volatility rising across sovereign bond and currency markets, the next major test for the dollar arrives on Tuesday with the release of the U.S. Consumer Price Index (CPI).
The inflation gauge is perhaps the most closely watched macroeconomic indicator of the month, arriving just as investors solidify bets that the Federal Reserve will raise interest rates in December to combat sticky price pressures.
The U.S. central bank held borrowing costs steady last month after delivering a rate hike in September - its first such increase in three years. A hotter-than-expected CPI print would likely cement the case for the December hike, potentially unleashing a fresh wave of dollar buying by reinforcing the narrative of higher-for-longer American interest rates.
Fed commentary and Treasury auctions in focus
Before the inflation data drops, currency traders are closely monitoring a packed Monday schedule of Federal Reserve commentary and economic gauges.
Remarks from Federal Open Market Committee Member Michelle Bowman and Chicago Fed President Austan Goolsbee will be parsed for clues on how the central bank's inner circle views the robust labor market against the recent global deflationary shock in crude oil.
Additionally, the release of the Atlanta Fed's GDPNow estimate will provide fresh insights into the underlying momentum of the American economy.
Treasury supply will also test market appetite, providing direct insight into government financing conditions. The Treasury Department is scheduled to auction three-year notes later in the session.
With the previous auction yielding 4.932%, the sale will serve as a real-time barometer of government debt market conditions and investor tolerance for U.S. deficits following the recent midterm elections.
The dollar's pullback provided vital breathing room for major currency peers.
The euro climbed 0.4% to $1.118, capitalizing on the greenback's softness. However, the single currency's upside remains tethered to a distinctly cautious mood across the continent.
Eurozone traders are holding their fire ahead of their own macroeconomic gauntlet. The continent's rate trajectory hinges on impending third-quarter regional GDP figures, updated European Central Bank economic forecasts, and a wave of speeches from ECB policymakers trying to navigate stalling growth and imported inflation.
Meanwhile, the Japanese yen advanced 0.3% against the dollar, finding its footing after being battered by Friday's surge in U.S. Treasury yields.
The modest recovery reflects a tentative stabilization in global risk sentiment, though the yen remains highly sensitive to any hawkish surprises from Tuesday's U.S. CPI report that could further widen the punishing interest-rate differential between Washington and Tokyo.
Original Article
Dollar retreats from post-jobs spike as traders brace for U.S. CPI test
Eurozone yields consolidate after U.S. payrolls shock
Sterling today: Pound firms as dollar retreats from Friday rally
