Dollar steady; Fed speakers could provide impetus

Investing.com - The U.S. dollar traded in a tight range Tuesday, steadying as traders looked for new clues over the expected timing and extent of Federal Reserve rate cuts this year.

At 04:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 104.475.

Dollar range bound ahead of Fed speakers

The dollar is basically steady Tuesday, but has drifted higher so far this week after several Fed officials called for continued policy caution, even after data last week showed an easing in consumer price pressures in April.

Vice Chair Philip Jefferson said on Monday that it was too early to tell if the slowdown is "long lasting," and Vice Chair Michael Barr noted that restrictive policy needs more time, dulling hopes for early cuts.

There are more Fed speakers to digest Tuesday, including Barr once more, as well as FOMC members Thomas Barkin, John Williams and Raphael Bostic.

“Expectations for total Fed easing by year-end has been modestly scaled back to 42bp, but we suspect the next major move in OIS pricing will not come before the 31 May US core PCE,” said analysts at ING, in a note.

“Our view remains neutral on the dollar in the coming days, although risks appear skewed slightly to the upside.”

Euro calm as German PPI falls sharply

In Europe, EUR/USD traded 0.1% higher to 1.0861, barely moving after German producer prices fell more than expected in April, dropping 3.3% on the year, due mainly to lower energy prices.

Excluding energy prices, German producer prices were 0.6% lower than in April 2023.

Inflation is dropping away in the eurozone’s largest economy, something that should help ECB officials agree to an interest rate cut in June.

“We are not expecting major swings today as the data calendars in the eurozone and US are light,” added ING. “A speech by European Central Bank President Christine Lagarde today at an event in honour of Janet Yellen may not touch on monetary policy at all.”

GBP/USD edged higher to 1.2709, trading in a tight range ahead of Wednesday’s release of April U.K. CPI data, with the annual rate of inflation expected to have slowed dramatically to near the 2% level targeted by the Bank of England.

Yuan, yen remain weak

In Asia, USD/CNY traded 0.1% higher at 7.2371, remaining in sight of a six-month high after the People’s Bank kept its benchmark loan prime rate unchanged at record lows earlier in the week.

USD/JPY fell 0.1% to 156.17, with the Japanese yen still weak in the face of persistent pressure from U.S. interest rates, while uncertainty over the Bank of Japan’s plans to begin tightening policy also presented a dour outlook.

This article first appeared in Investing.com