Dollar Lacks Momentum; Retail Sales Impact Rate Cut Expectations

1. US Dollar Trades Muted Amid Holiday, Rate Cut Speculation

The US dollar started the week trading in a muted fashion, with limited activity due to the Martin Luther King Jr. Day holiday in the United States. Traders are currently considering the chances of early rate cuts by the Federal Reserve, following the unexpected drop in US retail sales data released on Friday. This drop has increased market bets that the Fed may start cutting interest rates earlier than expected. The US data calendar for the week is relatively quiet, with the main focus being on Wednesday’s retail sales data release. This data will provide insights into how consumer spending is holding up in the face of elevated interest rates.