The U.S. dollar dipped slightly on Tuesday but stayed close to recent highs. The currency remains supported by optimism over the latest trade deal between the United States and China.
As of 04:30 ET (08:30 GMT), the U.S. Dollar Index — which measures the greenback against six major currencies — slipped 0.2% to 101.410. This came after a strong 1.6% surge on Monday that pushed the index to a one-month high.
Markets Settle Ahead of Inflation Report
Over the weekend, trade talks in Geneva led to a breakthrough between the U.S. and China. Both sides agreed to a 90-day pause on new tariffs, easing fears that the trade conflict would trigger a recession.
The agreement includes limits on future tariffs. China’s new tariff rate was set at 30%, lower than many had expected. This has helped reduce uncertainty in global markets and brought more clarity to trade relations.
The dollar saw gains following the news, but trading has calmed as investors wait for the latest U.S. inflation data.
Economists expect April’s Consumer Price Index (CPI) to show a 2.4% annual increase, matching March’s level, with a monthly rise of 0.3%. The core CPI — which excludes food and energy — is also expected to rise 0.3% month-on-month and 2.8% year-on-year.
Some experts warn that former President Donald Trump’s tariff policies could increase inflation pressures in the U.S. Recent consumer surveys also show households are preparing for higher prices in the coming months.
“The April core CPI is expected to remain steady at 0.3% month-on-month,” said analysts at ING. “This supports the idea that the Federal Reserve won’t rush to cut interest rates.”
Analysts also noted that market expectations for the Fed’s terminal interest rate have increased. The expected peak has shifted to 3.50%, up from 3.00% earlier this year. The first rate cut is now seen as likely in September, possibly by 50 basis points to start a new easing cycle.
Euro and Pound Regain Ground
The euro recovered slightly, with EUR/USD up 0.2% at 1.1107. This comes after the currency fell 1.4% the day before.
Investors are also watching for Germany’s May investor sentiment survey, due later in the day. The ZEW index is expected to improve after recent tariff worries pushed sentiment to its lowest level since the Ukraine conflict began.
“EUR/USD may have just finished the first leg of a longer-term bullish trend,” ING said. “We expect strong buying interest around the 1.1030–1.1050 range, with a possible dip to 1.0850. But the recent pullback supports our year-end forecast of 1.13.”
The British pound also gained, with GBP/USD rising 0.3% to 1.3211. This came despite data showing a continued slowdown in the U.K. labor market.
Related topics:
