HomeForexUS dollar weakens, euro strengthens before important wage data release.

US dollar weakens, euro strengthens before important wage data release.

Dollar Drifts Lower, Euro Edges Higher Ahead of Key Wages Data

Dollar Index Slips Lower in Early European Trade

The U.S. dollar slipped lower in early European trade Tuesday, remaining close to recent highs due to the prospects of higher-for-longer U.S. interest rates. The Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 104.082 at 04:45 ET (09:45 GMT).

Dollar Quiet Ahead of Fed Minutes

The greenback has edged lower with U.S. traders set to return after Monday’s Presidents’ Day holiday. It remained close to three-month highs amid mounting expectations that the Federal Reserve will delay the start of its rate-cutting cycle to the start of the summer compared with the expected March at the beginning of the year.

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Euro Awaits ECB Wage Data

The euro traded 0.2% higher at 1.0795, helped by data showing the eurozone’s current account in a larger than expected surplus in December. Traders are now keenly awaiting the release of regional fourth-quarter negotiated wages data, due later in the session, given the importance Europe’s central bank has placed on wage growth as it attempts to contain inflation.

China Cuts Key Rate, Yen Remains Weak

In Asia, the yuan traded largely unchanged at 7.1983, helped by a strong daily midpoint fix after the People’s Bank of China cut its benchmark five-year loan prime rate by a bigger-than-expected 25 basis points to 3.95%, a record low. The move provided little cheer to Asian markets as it also underscored increasing government anxiety over an economic slowdown in Asia’s biggest economy.

The U.S. economic data calendar is largely empty Tuesday, likely resulting in quiet trading ahead of the release of the minutes of the Fed meeting from last month, scheduled for Wednesday.

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“The view that the U.S. data will turn at some point, the Federal Reserve will cut, and the dollar will decline remains a consensus one (and often translates into selling USD rallies),” said analysts at ING, in a note.

“We favor a strong dollar in the near term as U.S. data remains supportive, but this looks increasingly to be the perfect recipe for range-bound trading.”

Data released last week showed both U.S. and increased more than expected in January, while Fed official Mary Daly stated on Friday that there is still “more work to do” to bring inflation back down to the U.S. central bank’s 2% target.

In Europe, traded 0.1% higher at 1.2605, in quiet trading ahead of the release of the monthly surveys of business activity later this week.

The data is expected to show that British business activity is improving, led by a surge in service-sector activity to its fastest pace since last May.

This follows Friday’s data which showed U.K. grew at their fastest pace in nearly three years in January.

Rose 0.1% to 150.31, with the yen weakening past the 150 level as the prospect of a slow exit from the Bank of Japan’s ultra-dovish monetary stance put pressure on the Japanese currency.

Breaks above 150 have attracted government intervention in the past, with officials also offering verbal warnings on any such moves last week.

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