Apart from this, the risk of a further escalation in tensions between the US and China is seen as another factor benefitting the Greenback's relative safe-haven status. It is worth mentioning that China retaliated against Taiwan President Tsai Ing-wen’s US visit and carried out aggressive military drills around Taiwan on Monday. The de facto US embassy in Taiwan said on Sunday the US has sufficient resources and capabilities regionally to ensure peace and stability. This comes amid worries about a deeper global economic downturn, which continues to weigh on investors' sentiment and drives some haven flows.
Market participants, however, seem convinced that the Fed will cut rates in the second half of the year and the expectations were fueled by the recent US macro data, which has been pointing to slowing economic growth. This, in turn, might hold back the USD bulls from placing aggressive bets and cap the upside ahead of the FOMC meeting minutes, due on Wednesday. This week's US economic docket also features the release of the latest consumer inflation figures and monthly retail sales data, which if misses consensus estimates will take Fed rate-hike bets off the table and weigh on the USD.
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