Investing.com – The U.S. dollar rose in early European trading on Tuesday, climbing away from a one-month low as traders digested the increased chances of former President Donald Trump returning to the White House, as well as the likelihood that the Federal Reserve will make spending cuts . interest rates in September.
At 05:20 ET (09:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 103.952, after falling to its lowest level since mid-July earlier this week.
Dollar looks to Trump for strength
The dollar rose after Donald Trump received an enthusiastic welcome on the first day of the Republican National Convention in Milwaukee, just days after he survived an assassination attempt in Pennsylvania on Saturday.
The four-day convention will culminate with Trump’s primetime address on Thursday, when he formally accepts the party’s nomination to face President Joe Biden in a rematch of their 2020 race.
The attack has fueled expectations of a Trump victory in the November election – a scenario that could boost the dollar as he has signaled his intention to adopt a more protectionist trade policy.
“A stronger dollar appears to be driven by rising expectations of a Trump presidency following the events of last weekend,” ING analysts said in a note. “If markets continue to increase their Trump bet, there are greater chances of broad preemptive positioning in the months leading up to November.”
That said, the dollar is still trading just above a one-month low after comments from the Federal Reserve chairman pointed to the likelihood of a rate cut in September.
On Monday, Powell said the three second-quarter U.S. inflation data “contribute somewhat to confidence” that the pace of price increases is sustainably returning to the Federal Reserve’s target.
The comments, likely Powell’s last until his press conference after a Fed meeting in late July, changed expectations for rate cuts.
ECB meeting threatens to be big
rose 0.1% to 1.0899, with the euro just below a four-month high ahead of Thursday’s policy-setting meeting.
The ECB is widely expected to maintain its current interest rates after easing them in June, so attention will turn to the chief’s comments at the accompanying press conference.
was trading marginally lower at 1.2963, after climbing to its highest level in more than two years last week.
The political certainty following the landslide election victory of Britain’s center-left Labor government has helped the pound gain friends, especially in contrast to the turmoil in both France and the US.
The yen is reversing recent gains
In Asia, it traded 0.3% higher at 158.47 as the yen weakened, further stalling the recent recovery against the dollar.
The recent rise in the yen had increased speculation about whether the Japanese government had intervened in the currency markets to support the yen.
Japanese officials on Tuesday reiterated their warnings about intervention, saying they were ready to take all possible measures to stem excessive volatility in currency markets.
traded 0.1% higher at 7.2661, with the yuan near an eight-month low, battered by data showing China’s economy grew less than expected in the second quarter.
