Investing.com – The U.S. 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 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 105.125 but still below Friday’s one-and-a-half high month at 105.80. .
Dollar sees volatile trading
The US currency has seen volatile trading over the past week, influenced by cooling inflation data but then buoyed by the Federal Reserve, which cut the number of expected cuts this year to just one from three in March.
Investors are trying to figure out when the Federal Reserve will start cutting rates, so they will be studying May retail sales figures, which will be released later in the session.
Economists expect an increase of 0.3%, after unexpectedly flat in April.
Also interesting are the speeches by a number of Fed officials during the week.
The Philadelphia Fed president indicated on Monday that investors should probably expect only one rate cut this year.
“If all goes as forecast, I think one rate cut by the end of the year would be appropriate,” Harker said, after laying out his view that he sees slowing but above-trend economic growth, a modest increase in unemployment, and a “long flight” back to the inflation target as a base case.
The euro stabilizes after politically inspired losses
fell 0.1% to 1.0724, with the euro stabilizing to some extent after the previous week’s sharp losses in the wake of the political unrest following the rise of the far-right parties in the European Parliament elections, and the announcement of early elections in France.
“The swing in options positioning and the undervaluation of the EUR/USD suggest that, if markets scale back the political risk premium, there would be significant room for recovery in the pair,” ING analysts said in a note.
“However, we doubt that this will happen before the June 30 parliamentary vote in France, and that the euro will lag behind any negative USD dynamics.”
The final May reading for the eurozone will come later in the session, with the annual figure expected to be confirmed at 2.6%, up from 2.4% the month before.
fell 0.2% to 1.2679, ahead of the release of the May UK CPI on Wednesday and the Bank of England policy meeting the following day.
The bank is expected to hit the 2% target for the first time in almost three years, but underlying inflation is expected to remain above 3%.
Rates are likely to remain unchanged, with markets now estimating a roughly 40% chance of a quarter-point move in August and a 70% chance in September.
Australia stable after RBA holds rates
In Asia, the yen traded 0.3% higher at 158.16, with the yen still weak after holding rates steady last week. The yen said it would only give clear signals at the July meeting about its plans to reduce its bond purchases.
traded largely unchanged at 7.2561, but fell slightly to 0.6611, unaffected by expectations the Reserve Bank of Australia would keep rates steady on Tuesday.