Investing.com – The US dollar stabilized on Tuesday, while the euro tried to stage a comeback after the previous session’s heavy losses.
At 04:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading largely unchanged at 100.575, just above a 12-month low.
Dollar Stabilizes After Sell-off
The US currency is stabilizing after last week’s sell-off in the wake of the Federal Reserve’s rate cut.
The Fed started its rate-cutting cycle with a big cut of 50 basis points, and now attention is turning to the size of the central bank’s further cuts this year.
Traders are now betting that there is a roughly 53% chance that the Fed will cut rates again by half a point at its next meeting in November, according to CME Group’s (NASDAQ:) closely watched FedWatch Tool.
Markets are likely to follow comments from the Fed governor – and some dissenter on the size of last week’s rate cut – on Tuesday.
This month’s release will come later in the session, but most attention will be on Friday’s release, the Fed’s favorite inflation gauge, for more clues.
The euro is recovering after a sell-off
In Europe, it traded 0.2% higher at 1.1135, trying to recover from a decline of around 0.5% overnight, after data released on Monday showed business activity in the euro zone shrank sharply this month.
The slump appeared to be broad-based, with Germany, Europe’s largest economy, seeing its decline deepen, while France – the second largest – returned to contraction.
The rate cut for the second time this year earlier this month last week, and further signs of economic weakness could increase the chances of another rate cut in October.
was trading largely unchanged at 1.3347, not far from last week’s 2-1/2 year high after the Bank of England left rates unchanged.
“We do not view the GBP/USD positioning as particularly tense and given perhaps a softer dollar environment, the price direction remains towards 1.35,” ING analysts said in a note.
Yuan rises on stimulus news
traded 0.2% lower to 7.0356, with the pair falling to the lowest level since May 2023 after the Chinese government announced a barrage of stimulus measures, raising hopes of a recovery in Asia’s largest economy.
rose 0.6% to 144.51, after Purchasing Managers Index data showed a continued decline in 2013, while the services sector continued to grow.
The Bank of Japan kept interest rates steady last week and expected inflation and economic growth to rise steadily.
fell 0.2% to 0.6825 after yields held steady as widely expected, while reiterating its determination to tame stubborn inflation.
