Investing.com – The US dollar strengthened on Monday, rebounding after piercing losses tardy last week on signs of easing inflationary pressures, while the euro fell on dovish comments from ECB chief Christine Lagarde.

At 0500 ET (1000 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.4% at 107,750, after falling sharply from a two-year high on Friday.

The dollar rebounds after a piercing rebound

The dollar rebounded on Monday after falling sharply on Friday as the Federal Reserve’s preferred currency showed a modest monthly price gain, with a measure of core inflation posting its smallest gain in six months.

This eased some concerns about the scale of May 2025 interest rate cuts, which had increased following a hawkish outlook for U.S. interest rates following the Fed’s last policy meeting this year.

That said, investors are pricing in 38 basis points of rate cuts next year, just shy of the two 25 basis point rate cuts that the Fed projected last week, with the market pushing the first rate cuts in 2025 to June and the cut in March valued at approximately 53%.

Trading volumes are likely to decline as we approach the end of the year and this trading week will be shortened due to the holiday season.

Eurozone “very close” to the ECB’s inflation target

In Europe, it fell 0.1% to 1.0414, close to the two-year low it hit in November, marking a 5.5% decline this year after the president of the European Central Bank said the eurozone was “very close” to achieving the central bank’s medium-term inflation target.

“We are approaching the stage where we can announce that we have brought inflation down to 2% on a sustainable basis in the medium term,” Lagarde said in an interview published by the Financial Times on Monday.

In early December, Lagarde said the central bank would make further interest rate cuts if inflation continued to fall to its 2% target, as curbing growth would no longer be necessary.

It cut its policy rate last week for the fourth time this year and is likely to make further rate cuts in 2025 if inflation concerns fade.

quotations remained unchanged at 1.2571 after data showed the British economy failed to grow in the third quarter, deepening signs of an economic slowdown.

The Office for National Statistics lowered its estimate of change in output to 0.0% in the July to September period from its previous estimate of a 0.1% raise.

The ONS also lowered its second quarter growth estimate to 0.4% from the previous 0.5%.

Policymakers voted 6-3 last week to keep interest rates unchanged, a bigger divide than expected amid concerns about an economic slowdown.

The yuan reached its highest level in a year

In Asia, it rose 0.2% to 156.72, after rising as high as 158 last week on dovish signals from .

The BOJ has signaled that it is not considering raising interest rates in the near future despite the recent rise in inflation, and may not raise rates until March 2025.

rose 0.2% to 7.3080, hitting a one-year high as investors remained concerned about China’s economic prospects. While Beijing is expected to raise fiscal spending in the coming year to support the economy, looser monetary conditions will weaken the yuan.