Investing.com – The US dollar rose on Tuesday ahead of key retail sales data and speeches from Federal Reserve officials, as traders looked for clues to better gauge the timing and pace of interest rate cuts.
At 04:20 EDT (08:20 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 105.125, but still below its highest level in a month and a half. Friday at 105.80. .
The dollar is witnessing volatile trading
The US currency saw volatile trading over the past week, weighed down by cool inflation readings but then supported by the Federal Reserve which reduced the number of cuts expected this year to just one, from three in March.
Investors are trying to figure out when the Fed will start cutting interest rates, so they will study May retail sales data, due later in the session.
Economists expect the index to rise by 0.3%, after unexpectedly stabilizing in April.
Also interesting are the speeches from a number of Fed officials during the week.
The head of the Federal Reserve Bank of Philadelphia indicated on Monday that investors are likely to expect only one rate cut this year.
“If all of this goes as expected, I think one rate cut would be appropriate by the end of the year,” Harker said, after making his point that he sees slowing but above-trend economic growth and a modest rise in the unemployment rate. and the “long slide” back to the inflation target as its base case.
Euro stabilizes after policy losses
It fell 0.1% to 1.0724, with the euro somewhat stable after the sharp losses it suffered last week in the wake of political turmoil following the rise of far-right parties in the European Parliament elections, and the announcement of early elections in France.
“The swing in options positions and the depreciation of the EUR/USD pair suggest that if markets trim the political risk premium, there will be plenty of room for recovery in the pair,” analysts at ING said in a note.
“However, we suspect this could happen before the first round of parliamentary voting in France on June 30, and the euro should remain a laggard in any negative USD dynamics.”
The final May reading for the euro zone is due later in the session, with the annual figure expected to be confirmed at 2.6%, up from 2.4% the previous month.
It fell 0.2% to 1.2679, ahead of the UK CPI for May on Wednesday and the Bank of England policy meeting the following day.
Inflation is expected to fall to the bank's 2% target for the first time in nearly three years, but core inflation is expected to remain above 3%.
It is likely to keep interest rates unchanged, with markets now placing around a 40% chance of a quarter-point move in August and a 70% chance in September.
The Australian dollar is stable after the Reserve Bank of Australia stabilized interest rates
In Asia, it traded 0.3% higher at 158.16, with the yen remaining weak after it held interest rates steady last week and said it would only give clear signals about its plans to start reducing its bond purchases at the July meeting.
It traded largely unchanged at 7.2561, while falling slightly to 0.6611, unaffected by the Reserve Bank of Australia's expectations to keep interest rates steady on Tuesday.
