Investing.com – The US dollar traded in a narrow range on Tuesday, holding steady as traders looked for new clues about the expected timing and extent of federal interest rate cuts this year.
At 04:30 EDT (08:30 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading largely unchanged at 104.475.
Dollar range limited ahead of Fed speakers
The dollar was essentially flat on Tuesday, but drifted higher so far this week after several Fed officials called for continued policy caution, even after data last week showed a decline in consumer price pressures in April.
The vice president said on Monday that it was too early to know whether the slowdown was “long-term,” and the vice president suggested that the restrictive policy needed more time, dashing hopes for early cuts.
There are more Fed speakers to accommodate on Tuesday, including Barr again, as well as members of the Federal Open Market Committee, and…
“Expectations for total Fed easing by year-end have been trimmed modestly to 42 basis points, but we suspect the next major step in OIS pricing will not come before the core US PCE report on May 31,” analysts at ING said in a note. .
“Our view remains neutral on the dollar in the coming days, although risks appear slightly biased to the upside.”
Euro calm with German PPI falling sharply
In Europe, trading rose 0.1% to 1.0861, barely moving after falling more than expected in April, falling 3.3% year-on-year, mainly due to lower energy prices.
Excluding energy prices, German producer prices fell by 0.6% from April 2023.
Inflation is falling in the euro zone's largest economy, which should help European Central Bank officials agree to cut interest rates in June.
“We do not expect significant volatility today, as data calendars in the Eurozone and the US are light,” ING added. “European Central Bank President Christine Lagarde’s speech today at an event in honor of Janet Yellen may not touch on monetary policy at all.”
It rose to 1.2709, trading in a narrow range ahead of the release of UK CPI data for April on Wednesday, with annual inflation expected to slow significantly to approach the 2% target level of the Bank of England.
The yuan and yen are still weak
In Asia, the interest rate rose 0.1% to 7.2371, remaining close to its highest level in six months after the People's Bank of China kept its key loan interest rate unchanged at record low levels earlier in the week.
It fell 0.1% to 156.17, with the Japanese yen continuing to weaken in the face of continued pressure from US interest rates, while uncertainty over the Bank of Japan's plans to start tightening policy also presented a bleak outlook.