Investing.com – The U.S. dollar was steady on Tuesday, while the euro tried to recover from the previous session’s heavy losses.
At 04:00 ET (08:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was steady at 100.575, just above its lowest level in 12 months.
Dollar stabilizes after selling wave
The US currency steadied after last week’s sell-off following the Federal Reserve’s interest rate cut.
The Federal Reserve kicked off its rate-cutting cycle with a massive 50 basis point cut, and now attention is turning to how much more the central bank will cut this year.
Traders are now betting there is about a 53% chance the Fed will cut rates by another half-point at its next meeting in November, according to the FedWatch tool closely watched by CME Group (NASDAQ:).
Markets are likely to be watching closely for comments made Tuesday by the Federal Reserve chairman — the lone dissenter from the size of last week’s rate cut.
Data for this month is due later in the session, but most eyes will be on the release of the Federal Reserve’s preferred inflation gauge on Friday for further clues.
Euro rises after selling wave
In Europe, the euro rose 0.2% to 1.1135, trying to recover after falling about 0.5% overnight after data released on Monday showed business activity in the euro zone contracted sharply this month.
The recession appears to be broad-based, with Germany, Europe’s largest economy, deepening its downturn, while France, Europe’s second-largest, has slipped back into contraction.
The Fed’s second rate cut this year earlier this month, coupled with further signs of economic weakness, could raise the chances of another rate cut in October.
Sterling was little changed at 1.3347, not far from a two-and-a-half-year high hit last week after the Bank of England kept interest rates on hold.
“We don’t see GBP/USD as particularly overvalued, and perhaps in a weaker dollar environment, the trend continues towards 1.35,” analysts at ING said in a note.
Yuan rises on stimulus news
Sterling fell 0.2% to 7.0356, with the pair falling to its lowest level since May 2023 after the Chinese government announced a series of stimulus measures, raising hopes of a recovery in Asia’s largest economy.
The headline US Purchasing Managers’ Index (PMI) rose 0.6% to 144.51, after PMI data showed a continued decline, while the services sector recorded further growth.
The Bank of Japan kept interest rates steady last week, saying it expects inflation and economic growth to rise steadily.
The U.S. dollar fell against a basket of major currencies on Tuesday, after the central bank kept interest rates steady as widely expected, while stressing its determination to tame stubborn inflation.