Investing.com – The U.S. dollar held steady Tuesday as investors look ahead to the release of key economic data, including Friday’s U.S. payrolls data, that could cement a Federal Reserve interest rate cut later this month.
At 04:05 ET (09:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading largely unchanged at 101.617, just below Monday’s two-week high of 101.79.
The index fell 2.2% in August on expectations of US interest rate cuts.
Dollar focuses on the labor market
The US will be the first major indicator in a big week for US data later in the session, expected to show that the country’s manufacturing sector is still in contraction territory.
However, it is the labor market that will be in the spotlight this week, as Fed policymakers seek confirmation that it is time to start easing monetary policy, especially after Fed Chairman Jerome Powell last month endorsed an imminent being the start of interest rate cuts in a nod to concerns about the labor market.
Friday’s headline release will be the most important figure of the week, especially as the previous month’s labor report fell short of expectations, leading to a sharp sell-off in stock markets on recession fears.
Before that, Wednesday’s data and Thursday’s report will be in the spotlight.
Markets are pricing in a 69% chance of a 25 basis point cut when the Fed meets on September 17 and 18, with a 31% chance of a 50 basis point cut, CME’s FedWatch tool showed.
The euro is approaching its lowest point in two weeks
In Europe, trading traded 0.1% lower at 1.1061, not far from the previous session’s two-week low of 1.1042, after data showed eurozone manufacturing activity remained in contraction territory in August .
Rates were cut in June and look likely to do so again later this month, especially after rates fell to 2.2% in August, a more than three-year low.
Traders are also watching the uncertain political situation in Germany after the Alternative for Germany became the first far-right party to win parliamentary elections in Germany since World War II.
“It appears that investors were quickly reassured about the political situation after all other German parties seemed determined to keep the far-right AfD out of power following their victory in Thuringia,” ING analysts said in a note.
“At the same time, the ruling coalition appears to be growing weaker, and we cannot rule out future damage to the euro from EU politics. Especially when you add a likely turbulent EU budget season this autumn.”
fell 0.2% to 1.3129, while the UK data calendar was very quiet this week.
The pound sterling had a strong month in August and has risen more than 2% over the past month, boosted by expectations that the Bank of England will keep interest rates high for longer than in the United States and the eurozone.
The yen bounces back
In Asia, yields fell 0.6% to 146.03, down from Monday’s two-week high of 147.16, after data showed Japan’s factory activity contracted again in August, it previously showed a survey in the private sector.
traded largely flat at 7.1161, but fell 0.6% to 0.6750 ahead of the Australian report due on Wednesday.
