Investing.com – The US dollar was steady on Tuesday, largely ahead of the release of key inflation data that will likely play a role in the interest rate outlook.
At 03:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 105,250 in range trading.
Dollar calm ahead of key inflation data
The dollar, like the currency market as a whole, saw quiet trading early this week as traders await the release of the latest US inflation data, which will likely dictate near-term sentiment on possible rate cuts.
The month of April is expected later on Tuesday, ahead of Wednesday’s crucial CPI report, which is expected to show a 0.3% month-on-month increase in April, down from 0.4% growth the month before .
The Federal Reserve has made clear that any rate cuts will depend on the data, and persistent inflation has resulted in the pricing of just 42 basis points of easing this year, with a 60% chance of a cut in September, according to FedWatch tool from CME. .
If inflation turns out to be higher than expected, interest rate cuts for the rest of the year would likely be offset.
“Today’s PPI and tomorrow’s CPI figures will tell us whether the US has taken further steps in the disinflation process, or whether prices remain too stable for the Federal Reserve to cut,” ING analysts said in a note.
“The latter seems more likely, and also a consensus call – which could still leave the FX markets depressed without much sense of direction and volatility.”
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Sterling falls after weak jobs data
In Europe, employment fell 0.3% to 1.2523, after the release of the latest UK jobs data showed employment in the country rose to the highest level in almost a year.
UK unemployment rose to 4.3% in the three months to March – the highest level since May to July last year and up from 4.2% in the previous three months.
This would reinforce the idea of interest rate cuts in the near future, but what complicated the issue for the Bank of England was news that wage growth in the country remained strong.
, excluding bonuses, remained at 6%, continuing to exceed inflation. Growth was expected to slow to 5.9% between January and March.
traded 0.1% lower at 1.0778 after the latest figures showed inflation in the euro zone’s largest economy appears to be under control.
The German CPI rose by 2.2% year-on-year in April, only marginally above the European Central Bank’s medium-term target of 2%.
The ECB is widely expected to cut rates from a record high in June, and markets are now seeing three rate cuts this year, or two after June, most likely in September and December.
Yen is still under intervention surveillance
In Asia, the price rose 0.2% to 156.44, with the pair recovering much of the losses from earlier in May, when the government intervened in the currency markets on two separate occasions.
While traders saw 160 as the new limit for government intervention, the rapid rise of the USDJPY despite the threat of intervention has raised fears that the government could intervene sooner.
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rose 0.1% to 7.2377, with the yuan still weak as a prolonged slump in the property market has been a major pressure point on China’s economy despite repeated efforts by Beijing to support the sector.
