The Dollar Gains Ground USD

The US dollar rose slightly in early European trade Tuesday but remained just above a seven-month low as traders awaited Fed Chair Jerome Powell’s speech for more clarity on the central bank’s rate hike cycle.

The Dollar Index rose 0.22% to 102.960 after falling to a seven-month low of 102.93 the day before.

The dollar has been under pressure in the aftermath of Friday’s data, which showed a slowing in wage growth and the first contraction in US services industry activity in more than two years.

It has increased expectations that the Federal Reserve will ease up on its aggressive monetary tightening policy.

President Mary Daly of the Federal Reserve Bank of San Francisco stated on Monday that the central bank could either raise rates by 50 basis points for the second time or slow down to a quarter-point increase.

Currencies

In other news, the EUR/USD rose 0.1% to 1.0741, close to the previous session’s seven-month high of 1.0760, helped by French industrial production rising 2.0% month on month in November. It was better than the 0.8% growth expected and a significant improvement over the revised drop of 2.5% the previous month, raising hopes that the Eurozone slowdown in 2023 will be milder than previously anticipated.

After hitting a three-week high of 1.2209 on Monday, GBP/USD fell 0.1% to 1.2170. Retail sales in the United Kingdom rose 6.5% last month compared to the same month a year ago.

USD/JPY rose 0.1% to 132.00, with the yen falling despite data showing Tokyo inflation rose faster than expected in December, putting additional pressure on the Bank of Japan to tighten monetary policy shortly.

USD/CNY rose 0.1% to 6.7811, with the Chinese yuan approaching a four-month high following China’s relaxation of most anti-COVID measures and reopening its international borders. In comparison, AUD/USD fell 0.1% to 0.6902.