The U.S. dollar was lower against a basket of major currencies on Monday, as investors weighed the implications of a rate hike by the U.S. Federal Reserve in an economy that teeters on the edge of recession.
The central bank is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy.
Expectations for a hike of 75 basis points from the Fed stand at about 75%, according to CME’s Fedwatch Tool, with a 25% chance of a 100 basis point hike.
Recent data has shown signs of an economic slowdown while inflation remains stubbornly high, with claims for jobless benefits rising to its highest in eight months last week and regional manufacturing gauges slumping.
Later in the week, investors will also eye the advance reading for second-quarter gross domestic product, which could show negative growth and meet a traditional definition of recession.
U.S. equities gave up early gains with a slew of corporate earnings on deck for the week, including those from mega-cap names such as Apple, Microsoft, and Amazon . Investors are eyeing the earnings season for signs of a slowdown in the economy as well as the impact of a strong dollar on profits.