Dollar rises on Trump expectations; euro falls in light of inflation data


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The U.S. dollar was moving in early European trading on Tuesday, showing signs of recovering from recent losses, while the euro was losing ground ahead of the release of key inflation data.

Dollar gets Trump’s backing; Powell ready to speak out

The dollar index has risen as estimates of a second Donald Trump presidency have increased in recent days. This is supported by President Joe Biden’s wavering performance in the previous week’s debate and the Supreme Court’s ruling on Monday that Trump appears to have some judicial immunity regarding attempts to overturn his 2020 election defeat.

There are more signals about the Reserve’s future monetary policy decisions this week, starting with Chairman Jerome Powell’s address to a European Central Bank conference on Tuesday in Portugal.

On Wednesday, the minutes of the Fed’s June meeting will be released, and on Friday, June nonfarm payrolls data will provide more information about the labor market, a vital element for the Fed when it comes to cutting interest rates.

Economists expect the U.S. economy to have added 189,000 jobs in June, following a larger-than-expected increase of 272,000 the previous month.

The euro remains steady

The EUR/USD lost about 0.2% to 1.0716 in anticipation of the release of June inflation data for the euro zone.

The headline figure is expected to rise 2.5% year-on-year (y/y), down from 2.6% in May. The core figure, which excludes volatile elements such as food and energy prices, is expected to be 2.8% y/y in June, compared to 2.9% in May.

ECB President Christine Lagarde will give an important speech at the bank’s annual meeting in Portugal, which could influence future interest rate estimates.

Politics will continue to be in the spotlight this week, after the far-right National Rally won the first round of the French parliamentary elections held on Sunday.

However, the chances of the Euroskeptic, anti-immigration RN party coming to power next weekend remain uncertain and will depend on political deals to catch up with its rivals.

The GBP/USD lost about 0.2% to 1.2627 as a general election is due to be held in the UK on Thursday, with the opposition Labour Party expected to regain power.

This result would mark a return to normality after the severe political upheavals experienced during the 14 years of Conservative rule, which would likely boost sterling.

Yen sinks further

USD/JPY rose 0.2% in Asia to 161.69, marking a nearly 38-year high, sparking fresh expectations about possible government intervention in the currency market.

Japan’s finance minister said Tuesday that authorities were monitoring sharp movements in the currency market, although he stopped short of giving a clear warning of intervention.

USD/CNY rose 0.1% to 7.2714, nearing seven-month highs, helped by a broad shift in the central bank’s daily guidance that analysts said pointed to the authorities being determined to allow more monetary easing.

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