SINGAPORE : The dollar began the week nudging down from multi-year highs, with a hotter-than-forecast inflation reading in New Zealand lending modest support to the kiwi, though fears about Europe's gas supply put a cap on dollar selling.
Traders are holding their breath ahead of Thursday, when gas is supposed to resume flowing through the Nord Stream pipe from Russia to Germany after a shutdown for scheduled maintenance. Adding to headwinds for the eurozone is a political crisis in Italy, after Prime Minister Mario Draghi tendered his resignation last week, following failure to receive support from coalition party the 5-Star Movement over his plan to combat soaring prices.
"However, as the hawkish Fed and China’s deleveraging policy stance both limit the PBoC’s room to cut rates aggressively or consecutively, we still expect fiscal easing to be the main policy lever in H2." Hike expectations firmed a little bit in Australia and New Zealand after data showing New Zealand's inflation hit a three-decade high last quarter was published on Monday.