Investing.com – The US dollar fell on Tuesday, but remained near seven-week highs, as traders weighed the Federal Reserve’s monetary policy outlook in the wake of last week’s strong jobs report.
At 04:20 EDT (08:20 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, fell 0.2% to 102.139, after rising to the highest level in almost two months on Friday.
Dollar takes a break from gains
Friday’s strong report has traders reevaluating the Fed’s rate cut path, with another 50 basis points of interest rate cuts likely in November in favor of a more traditional 25 basis points cut.
The benchmark, reflecting less aggressive expectations, remained above 4% on Tuesday, while the two-year yield hovered near its highest levels in more than a month.
This helped strengthen the dollar, as did rising tensions in the Middle East, which affected risk appetite.
There are a number of speeches from Fed officials to absorb this week, in addition to the September inflation report and the minutes from last month’s Fed meeting.
“We have observed some very limited FX spillover from US 10-year bond yields hitting the 4% mark, which appears as a tail end of the payroll-induced move that has already led to some significant positioning adjustments in dollar pairs,” analysts at ING said. . , in a note.
“There is a possibility that the FX market will take a break from drifting behind interest rates now that the new, shallower interest rate path of 25 basis points per meeting by the Fed is the market baseline. We believe this week’s inflation data will not lead to directional changes.” A significant increase in the dollar, which may instead respond more to turmoil in the Middle East, and subsequent movements in oil prices.
The euro helped German industrial production
In Europe, it rose 0.2% to 1.0995, with the euro supported by stronger-than-expected data, with the August release rising by a larger-than-expected 2.9% from the previous month.
However, a comparison of the three less volatile months showed that production was 1.3% lower in the June-August period than in the previous three months.
The bank meets next week and is expected to ease policy again after cutting interest rates twice this year as inflationary pressures ease.
The index rose 0.2% to 1.3104, moving away from the three-week low it recorded on Monday at 1.3059, which it touched on Monday.
Data released earlier on Tuesday showed that sales across Britain’s retail sector rose at their fastest pace in six months throughout September.
Total sales rose 2% year-on-year, according to the British Retail Consortium, supported by a 3.1% rise in food retailers, while non-food transactions fell 0.3%.
The yuan falls after the holiday
It fell by 0.4% to 147.55, as it regained some of the sharp gains recorded over the past week.
Data showing steady growth in wages and household spending also helped the Japanese currency.
It rose 0.5% to 7.0506 with trading resuming a week later.
Sentiment towards China has been boosted by a series of stimulus measures taken by Beijing, which include lowering interest rates, but it is putting more pressure on the yuan, especially with expectations now that US interest rates will remain high.