The U.S. dollar remained subdued against major counterparts on Tuesday, close to multi-week lows following disappointing jobs data last week. Investors awaited Federal Reserve Chair Jerome Powell’s testimony for insights into future interest rate movements.
The euro held steady after volatile trading on Monday, as markets assessed the implications of a hung parliament in France. While signaling potential political gridlock, the outcome alleviates concerns over extreme fiscal policies from the far-right or left.
In early Asian trading, the U.S. dollar index, measuring the currency against a basket including the euro and yen, was unchanged at 104.99, near its lowest point in 3 1/2 weeks at 104.80.
Last week, the index fell 0.9%, exacerbated by Friday’s weaker-than-expected payroll report, prompting increased expectations of imminent Fed rate cuts.
According to the CME Group’s FedWatch Tool, traders now foresee a 76% likelihood of a rate cut in September, up from 66% a week ago. Another cut is anticipated by December.
Federal Reserve Chair Powell is scheduled to testify before Congress over two days starting Tuesday with the Senate, followed by the House on Wednesday.
Market analysts emphasized the significance of upcoming consumer price data on Thursday, suggesting it could influence market sentiment given recent moderation in inflation from earlier highs this year.
Ray Attrill, head of FX strategy at National Australia Bank, highlighted the pivotal nature of Powell’s messaging on managing inflation risks without compromising labor market stability, anticipating further dollar weakness over the medium term.
Commenting on the French election outcome, Attrill noted market resilience to the prospect of political deadlock, interpreting it as a preferable scenario to more extreme alternatives that could disrupt fiscal policies.
The euro was unchanged at $1.0827, hovering close to Monday’s peak of $1.0845 and dipping to $1.07915 earlier in the day.
Sterling traded flat at $1.28085 after reaching $1.28455 on Monday, its highest level since June 12.
The yen held steady at 160.91 per dollar, stabilizing this week after rebounding from a nearly 38-year low of 161.96 earlier.
