The U.S. dollar held steady on Tuesday, rebounding slightly after falling to a seven-week low as investors awaited critical employment and inflation figures likely to reinforce expectations for a Federal Reserve rate cut next week.
At 04:15 ET (08:15 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, inched up 0.1% to 97.447, recovering some ground after its slide to the weakest level since late July.
Payrolls revisions loom
The dollar has trended lower in recent sessions following data pointing to a softening U.S. labor market. Last Friday’s nonfarm payrolls report revealed a sharp slowdown in job creation for August, while unemployment climbed to nearly a four-year high.
Later in the day, the U.S. Bureau of Labor Statistics is set to release preliminary benchmark revisions for payrolls covering April 2024 through March 2025. Economists expect a downward adjustment of up to 800,000 jobs, which could indicate the Fed lagging in its pursuit of maximum employment.
“This time last year, the preliminary revision was -818k and it looks like we would need to see a bigger number than that to trigger a fresh leg lower in short-term U.S. interest rates and the dollar,” said analysts at ING in a note.
This week also brings the release of the U.S. consumer price index for August, with markets closely monitoring the impact of the Trump administration’s tariffs on inflation.
Bank of America forecasts U.S. inflation will remain “sticky” in August, projecting headline CPI to rise from 2.7% to 2.9% year-on-year, its highest since last July, while core CPI is expected to hold at 3.1%.
The Federal Reserve’s next policy meeting is scheduled for next week, where a rate-cut cycle is widely anticipated following a year of steady interest rates.
Euro pressured by French political uncertainty
In Europe, EUR/USD slipped 0.1% to 1.1750, pressured by France’s parliament voting down the government on Monday over plans to curb rising national debt, intensifying political uncertainty in the eurozone’s second-largest economy.
“The question now is whether the discordant political parties decide to agree on the ’what’ (how to reach an agreement on the budget) before agreeing on ’who’ to lead the government. None of this can be seen as good news for the euro,” said ING.
The European Central Bank is widely expected to keep rates unchanged at its policy meeting on Thursday.
GBP/USD edged up 0.1% to 1.3560, with the pound benefiting from the weaker dollar, following a gain of more than 0.5% on Friday.
Yen experiences volatility
USD/JPY fell 0.3% to 147.07 after wild swings on Monday triggered by Prime Minister Shigeru Ishiba’s unexpected resignation. Ishiba’s departure heightens political uncertainty in Japan, which may delay further rate hikes by the Bank of Japan.
USD/CNY traded down 0.1% to 7.1270, with the yuan reaching its strongest level since November 2024. This follows the People’s Bank of China setting its highest yuan midpoint in 10 months, amid signs Beijing is strengthening the currency to ease tensions with the U.S. A stronger yuan combined with a softer dollar makes American exports to China more competitive.
AUD/USD rose 0.3% to 0.6609, reaching a seven-week high, despite a private survey showing that Australian consumer sentiment declined in September and remains weak amid uncertainty over interest rates and slower economic growth.
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