The dollar index traded sideways as the market continued to digest last week’s data, which showed a faster-than-expected contraction in the U.S. manufacturing sector and weaker-than-anticipated consumer morale in February, with both expectations and current conditions deteriorating, according to the final reading of the Michigan consumer survey.
Traders could remain cautious ahead of more U.S. economic data and Fed commentary to better gauge the interest rate outlook.
Later today, figures for U.S. services activity and factory orders are expected and could fuel some volatility.
The yuan remained flat against the dollar after China announced a GDP growth target of around 5% for 2024, aligning with expectations.
The country also set targets for an urban unemployment rate of around 5.5%, the creation of 12 million new urban jobs, and a CPI increase of around 3%. Investors are eagerly awaiting updates from the ongoing “Two Sessions” meetings for clearer policy plans.
The People’s Bank of China (PBOC) made its most aggressive cut to the five-year loan prime rate since its introduction in 2019, reducing it by 25 basis points to 3.95% in February.
While stable GDP growth targets and employment goals may provide some support to the yuan, concerns persist due to the slowdown in the services sector, moderate inflation targets, and aggressive monetary policy actions by the PBOC, leaving the overall sentiment slightly negative.
