Investing.com – The U.S. dollar edged higher in tight trading Tuesday as traders awaited the release of the July Producer Price Index, the first of the week’s double inflation bill, to guide future Federal Reserve monetary policy decisions.
At 05:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 103.072, reversing its sluggish overnight performance continued.
Dollar awaits PPI release
The , which measures changes in prices for producers, is expected to rise 0.2% from the month of July, an annual increase of 2.3%, compared to 2.6% the month before.
The figure, which excludes volatile food and energy components, is also expected to rise by 0.2% month-on-month, up from 0.4% in June, with an annual increase of 2.7%, down from 3, 0%.
“We expect a 0.2% MoM consensus in headlines and key measures to ease market jitters about a round of higher CPI/PCE, which would deliver a blow to risk sentiment just as global equity indices begin their recovery of recent losses,” analysts at ING said in a note.
The most watched figures will be released on Wednesday and are also expected to show that inflation has cooled slightly in July.
Investors will sift through the data set to try to decide whether the Federal Reserve will go for a 50 basis point or 25 basis point cut at its September meeting. According to CME’s FedWatch tool, traders are currently evenly split between the two.
At the end of July, it had kept the policy rate within the same range of 5.25%-5.50% for more than a year, but indicated that a rate cut could come as early as September if inflation cools further.
Sterling higher after wage growth
In Europe it traded 0.3% higher at 1.2801 after the release of data showing Britain, excluding bonuses, rose 5.4% in June.
While this still represents a decline from the previous month’s revised 5.8%, it was still above the expected growth rate of 4.6%, suggesting that the Bank of England will struggle to fully control inflation to keep in check.
In addition, UK supermarket inflation turned higher this month for the first time since March 2023, with market researcher Kantar saying annual food price inflation was 1.8% in the four weeks to August 4, up from 1.6% in the previous period.
fell 0.1% to 1.0922, with the euro falling slightly after Spain fell 0.5% in July, an annual increase of 2.8%
They started cutting interest rates in June, and many expect policymakers to agree to another cut in September, especially as inflation shows signs of disappearing.
The yen is falling
In Asia, the yen rose 0.4% to 147.81, with the yen weakening after a Reuters report that Japan’s parliament plans to hold a special session on August 23 to review the central bank’s decision last month to overturn discuss raising interest rates.
The pair had fallen to 141 last week on increased safe-haven demand and a weakening carry trade, but questions remain over how much room there was for the BOJ to raise rates further this year.
fell 0.1% to 7.1704, with data due later this week.
