Dollar rises as traders wait for rate cut clues, euro falls

Dollar rises as traders wait for rate cut clues, euro falls
Dollar rises as traders wait for rate cut clues, euro falls

The dollar rose on Tuesday, pushing the euro down slightly, as traders waited for the US retail sales report and comments from Federal Reserve officials to gauge the timing of interest rate cuts.

The US dollar index, which measures the currency against six major currencies, was last up 0.18% at 105.46. It lost 0.2% on Monday, retreating from Friday’s six-week high of 105.80.

The greenback has been pulled in different directions as mild US inflation readings contrasted with a general hawkish stance by Fed officials at last week’s policy meeting, when they cut their median projection. previous from three quarter-point rate cuts this year to one.

The dollar’s 0.6% rally last week was mainly driven by the euro’s sharp decline after French President Emmanuel Macron called an early election in response to his ruling centrist party’s defeat by the eurosceptic Regroupment. National of Marine Le Pen in the elections to the European Parliament.

The euro has stabilized this week and was trading 0.17% lower at $1.0716, but rising from a six-week low of $1.0668 on Friday, after rising 0.26% on Monday.

“Over the weekend, France’s Le Pen said she would be willing to work with President Macron and would not seek him out,” said Mohit Kumar, chief European economist at Jefferies.

“Some of the recent risk off movements have been driven by fears of ‘Frexit’ and the breakup of the euro zone,” he said. “Those fears are exaggerated.”

US retail sales data is due out at 1230 GMT (8.30am ET) and is expected to show a 0.3% month-on-month rebound in May, following zero growth in April.

The president of the Philadelphia Fed, Patrick Harker, revealed on Monday that he is in the side of the single cut, but left the door open to change his mind depending on the data that arrives.

A long list of Fed officials will take the stage at various locations later in the day, including the Boston Fed’s Susan Collins and the Richmond Fed’s Thomas Barkin.

“If you look at the data flow coming out of the US, the inflation data and the labor market data point to a shift in Fed policy,” despite the reduction in rate cut forecasts by part of officials, said Rodrigo Catril, senior currency strategist at National Australia Bank.

“At the moment, it is the safe haven appeal of the dollar that has been keeping it supported,” Catril added.

The dollar rose 0.26% to 158.13 yen, again approaching Friday’s six-week high of 158.26. The British pound fell 0.15% to $1.2686.

For its part, the Australian dollar was not affected by the Reserve Bank of Australia’s decision to keep interest rates stable, as expected, and barely changed at $0.6615.

“The RBA’s stance was well telegraphed: they are in wait-and-see mode until they have more data on inflation,” NAB’s Catril said.

In cryptocurrencies, bitcoin fell about 1.6% to $65,270, around a one-month low.

 
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