The US dollar rose modestly on Tuesday, holding near a near two-week high as investor attention turns to the upcoming US jobs report expected at the end of the week.
At 00:05 EST (04:05 GMT), the price was trading 0.10% higher at 101.67. The price fell by 0.12% to 1.1058.
The report, due Friday, is expected to play a crucial role in shaping the Federal Reserve’s monetary policy, especially after Fed Chairman Jerome Powell signaled a shift from a focus on inflation to preventing job losses.
Currently, there is a 33% chance of a 50 basis point cut this month, with a quarter point cut fully expected. This represents a slight shift from the previous week, when the probability of a larger cut was 36%.
Markets were anticipating an interest rate cut by the Federal Reserve, with a 25 basis point cut having been included in expectations for several weeks. The dollar’s strength previously reflected this sentiment as it reached its highest level since August 20, driven by a rise in long-term Treasury yields to their highest since mid-August.
This rise in rates followed inflation data suggesting the Fed could opt for a smaller rate cut.
The resilience of the US economy is further underlined by recent gross domestic product data, which indicate that the Federal Reserve has room to moderate its policy easing. Despite this, traders are still betting on the likelihood of a Fed rate cut.
The outcome of the upcoming jobs report will likely have a significant impact on the dollar’s trajectory in the near term.
“A stronger-than-expected wage rate and lower unemployment rate would likely give markets more confidence that growth risks have abated, paving the way for stock valuations to remain elevated and a potential catch-up in some other markets/stocks that have lagged. Morgan Stanley economists said in a note.
