Shares rise, but debt crisis and inflation data dent dollar

Global shares edged up in light trading on Monday, ahead of U.S. inflation data this week that could prove instrumental in setting expectations for the outlook for monetary policy.

The dollar came under pressure as a deadline for lawmakers to resolve a standoff over the U.S. government’s borrowing limit drew ever closer.

The MSCI All-World index (.MIWD00000PUS), meanwhile, rose 0.2% on the day.

Friday’s robust U.S. payrolls report has prompted investors to dial back their expectations for the timing and size of the Federal Reserve’s first rate cut. Wednesday’s consumer price data is expected to show core inflation slowed moderately.

“With the Fed having hiked by 25 basis points last week and signalled a pause, this week’s inflation report is more about how long the Fed will keep rates at 5.25% before cutting,” CityIndex analyst Matt Simpson said.

“A hot print would presumably be bullish for the U.S. dollar as traders push potential cuts further into the future.”

Money markets show investors expect U.S. rates to have now peaked and could end this year below 4.40%. Against that backdrop, the dollar is close to its lowest in a year against a basket of major currencies.

This report’s information was first seen on REUTERS; to read more, click this link.