Investing.com – The US dollar rose in early European trade on Tuesday, rebounding after sharp losses overnight, while the euro fell after weak German employment data.
At 04:45 EDT (08:45 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, rose 0.1% to 104.165, after earlier falling below 104 for the first time in April 9.
JOLT data in the spotlight
The dollar stabilized on Tuesday after sharp losses at the start of the week after data showed a second straight month of slowdown in manufacturing activity and an unexpected decline in construction spending.
Signs of economic weakness have raised the possibility of the Fed cutting interest rates later this year, with federal funds futures now putting the chances of a September rate cut at about 59%, according to LSEG data, up from about 55% on Friday.
There is more important action scheduled for later in the session, in the form of the April Index, a closely watched indicator of the main monthly index on Friday.
“The dollar is starting to show signs of weakness,” analysts at ING said in a note. “Today's US JOLTS jobs data could determine whether the recent dollar losses are just dormant range trading or the start of an important new trend. We certainly see downside risks to the dollar today.”
Euro declines after weak German employment data
In Europe, it traded 0.1% lower at 1.0888, retreating after the pair rose to 1.0916 earlier in the session for the first time since March 21.
Data earlier Tuesday showed the number of people rose more than expected in May, increasing by 25,000 in seasonally adjusted terms, above the 10,000 expected.
“The spring recovery has not really started this year,” said Andrea Nahles, head of the Labor Bureau. “There is still a long time to improve.”
The Federal Reserve has signaled an interest rate cut at its next meeting on Thursday, but rising inflation in last week's data may give officials pause when considering when to ease next.
The index fell 0.2% to 1.2776, after previously rising to its highest levels since March 14.
The bank holds a pivotal monetary policy meeting later this month, and traders are awaiting clues as to when the interest rate cutting cycle will begin.
The Japanese yen is seeing demand
In Asia, the currency traded down 0.5% to 155.34, with the yen continuing to rise against the dollar after falling overnight below 156 for the first time since May 21.
The bank meets later this month, and traders will be looking for clues as to whether there will be another rise in interest rates.
It traded 0.1% higher at 7.2439, staying close to recent six-month highs as sentiment toward China remained weak.
It rose 0.5% to 83.494, with the Indian rupee falling after early indicators pointing to a narrow victory for Prime Minister Narendra Modi in the closely watched general elections scheduled for 2024.
While the victory still represents a rare third term for Modi, a smaller majority than he had hoped suggests greater difficulty in instigating economic reforms.