U.S. Dollar Edges Higher Ahead of Key Economic Data
The U.S. Dollar’s Performance
The U.S. dollar has seen a slight increase in early European trade on Tuesday. This comes as investors eagerly await crucial economic data that could offer insights into the Federal Reserve’s next steps. At 04:00 ET (09:00 GMT), the dollar index, which measures the greenback against a basket of six other currencies, was up by 0.1% at 101.125. This recovery follows a period where the dollar had slid about 2% in 2023, reaching a five-month low.
Factors Affecting Dollar Sentiment
The dollar has faced pressure due to heightened expectations of the Fed’s potential interest rate adjustments in 2024. The market currently reflects a probability of over 70% for a 25 basis point rate cut in March 2024. However, until the March meeting, there are several key economic readings to consider.
Anticipated Economic Data
Later Tuesday, the U.S. manufacturing data is expected to indicate continued contraction in the sector. Additionally, minutes from the last Fed meeting in December are scheduled for release on Thursday. However, the most anticipated data is the payrolls report for December, due on Friday. It is expected to show a decrease in job creation, which could significantly impact monetary policy decisions.
Performance of Other Currencies
In Europe, the euro traded lower at 1.1031, moving away from last week’s five-month peak of 1.1139. Meanwhile, the pound rose to 1.2751, reflecting a 5% gain last year. The yen also saw a decline following a major earthquake in Japan, while the Chinese yuan remained relatively stable.
