The U.S. dollar rose on Tuesday in anticipation of retail sales data along with speeches from the Federal Reserve, as traders look for signals to better gauge both the timing and pace of interest rate cuts.
Dollar trades with signs of volatility
The greenback has moved with signs of volatility over the past week, weighed down by cooling inflation data, but supported by a decrease in the number of estimated rate cuts this year by the Federal Reserve to just one, down from three in March.
With investors trying to figure out when the Fed will start cutting interest rates, they will be looking ahead to May retail sales data due later today.
Market analysts are forecasting a 0.3% increase after an unexpected stagnation in April. Also of much interest and attention will be speeches by several Fed officials during the week.
Philadelphia Fed President Patrick Harker noted on Monday that investors should possibly only expect one rate cut this year.
“If all goes according to expectations, I think a rate cut by the end of the year would be appropriate,” Harker said, after outlining his view of slowing but above-trend economic growth, a modest rise in the unemployment rate and a “long slide” heading toward the inflation target.
The euro appears to be stabilizing after policy-driven losses
The EUR/USD pair was down about 0.1% to 1.0724, and the euro was able to stabilize somewhat after the sharp losses recorded last week as a result of the political turmoil generated by the rise of far-right parties during the European Parliament elections along with the announcement of early elections by France’s President Emmanuel Macron.
The final reading of the May consumer price index for the euro zone will be released later in the session, and the annual figure is expected to confirm and remain at 2.6%, up from 2.4% last month.
GBP/USD lost 0.2% to 1.2679 ahead of May CPI in the UK this Wednesday along with the monetary policy meeting scheduled for Thursday.
The consumer price index is expected to fall to the Bank’s 2% target for the first time in almost three years, although core inflation is expected to remain above 3%.
The Bank of England is likely to leave rates unchanged, and markets now estimate the likelihood of a fourth rate hike in August at around 40% and around 70% for September.
The Australian dollar is stable after the Reserve Bank of Australia held rates steady
Elsewhere in Asia, USD/JPY rose 0.3% to 158.16, with the yen still weakened by the Bank of Japan’s decision to hold rates last week and announce that it will only give clear indications of its plans to begin tapering its bond purchases at its July meeting.
USD/CNY traded virtually unchanged at 7.2561, while AUD/USD fell slightly to 0.6611, unaffected by the Reserve Bank of Australia’s recent decision to hold rates on Tuesday, as expected.
