US Dollar Falls from Three-Month Highs Ahead of Key Economic Data
The US dollar experienced a slight drop in early European trading on Tuesday, retreating from nearly three-month highs as investors prepared for a week packed with important economic data releases. At 03:10 ET (0710 GMT), the US Dollar Index, which measures the greenback’s strength against a basket of six other major currencies, was down 0.1% at 103.907, following a 0.2% decrease on Monday.
Traders appeared to be taking profits at the start of a week that will feature significant economic releases, including the monthly non-farm payrolls for August, revised second quarter gross domestic product figures, and US consumer confidence data. The Federal Reserve will closely monitor these data points for any signs of resilience in the US economy, particularly with respect to inflation and employment. Positive indicators could further motivate the Fed to continue raising interest rates.
Despite the minor decline, the US dollar remains above 2% for the month, coming off a six-week winning streak as strong US economic data reaffirmed expectations for a prolonged period of rate hikes. Federal Reserve Chairman Jerome Powell’s hawkish remarks at the Jackson Hole symposium last week, suggesting that additional interest rate increases might be necessary to curb high inflation, added to these growing expectations.
The next Federal Reserve meeting is scheduled for September, and while no rate hike is expected at that time, there is increasing speculation that the US central bank will raise rates in November.
Meanwhile, the euro fell 0.1% to 1.0811 against the US dollar, following a decline in consumer sentiment in Germany. The GfK Consumer Sentiment Index dropped to -25.5 in September from a slightly revised -24.6 in August, dampening hopes for a sustained recovery amid persistently high inflation. European Central Bank President Christine Lagarde recently called for longer periods of higher interest rates to achieve the central bank’s goal of returning inflation to its 2% target.
Eurozone inflation data for August is set to be released later this week, and while the annual figure is anticipated to slightly decline to 5.1% from 5.3% in July, it will still exceed the central bank’s target of 2%.
In other currency news, the pound gained 0.1% to 1.2614, moving away from the two-month lows seen last week. The yen declined 0.1% to 146.44, nearing a 10-month high, while the Australian dollar dropped 0.2% to 0.6444. The Chinese yuan remained flat at 7.2903.
Investors will attentively monitor the upcoming economic data releases this week for further insights into the strength of the US economy and potential central bank moves.