Dollar Stabilizes Amid Upcoming Key Economic Data

The U.S. dollar held firm on Tuesday as markets awaited a series of critical economic data releases this week, while Japan’s yen hovered near three-month lows amid heightened political uncertainty.

Upcoming Data Releases Hold Market Attention

The dollar has recently been supported by economic indicators highlighting the resilience of the U.S. economy, leading investors to anticipate a slower pace of interest rate cuts from the Federal Reserve than initially expected. However, traders are cautious about taking new positions as a number of key data points are due this week.

Later in the session, the September JOLTS job openings data will be published, followed by the U.S. gross domestic product release on Wednesday. However, most of the focus will be on Thursday’s U.S. core personal consumption expenditures price index, the Fed’s preferred inflation metric, and Friday’s monthly employment report.

Another factor supporting the dollar has been increasing confidence that Republican candidate Donald Trump will secure next week’s U.S. presidential election. His policies on tariffs, immigration, and taxes are expected to be inflationary, which could further strengthen the dollar.

Improved Consumer Sentiment in Germany

In Europe, EUR/USD rose 0.1% to 1.0817, buoyed by a better-than-expected rise in Germany’s GfK consumer confidence index, which increased to -18.3 points from the prior month’s slightly revised -21.0. Nonetheless, the German economy remains under strain. The German Chamber of Industry and Commerce (DIHK) projected a contraction of about 0.2% in the eurozone economy this year, revising down its May forecast of stagnation.

The DIHK also forecasted zero growth through 2025, marking the third consecutive year without clear GDP growth. The European Central Bank has cut rates three times this year, each by 25 basis points, with expectations growing for a potentially larger reduction at its next meeting.

GBP/USD was up 0.1% at 1.2982, with the pound stable ahead of Wednesday’s Budget, the first under the new Labour government. According to the British Retail Consortium, annual U.K. store price deflation fell to 0.8% in the 12 months to October, marking the lowest rate since August 2021 and a steeper fall than September’s 0.6%.

“Households will welcome the continued easing of price inflation,” stated BRC chief executive Helen Dickinson. “But this downward trend remains vulnerable to geopolitical tensions, the impact of climate change on food supply, and the costs of government regulation.”

Political Uncertainty in Japan

USD/JPY increased by 0.1% to 153.38, hovering just above Monday’s low, the yen’s weakest level since July, following Japan’s national elections last Sunday. The results have heightened political uncertainty, potentially complicating the Bank of Japan’s plans to raise interest rates. The central bank is expected to keep rates unchanged on Thursday.

Japanese Finance Minister Katsunobu Kato reiterated on Tuesday that authorities would monitor currency movements, especially those influenced by speculative activity.

USD/CNY rose 0.2% to 7.1376, reaching a two-month high ahead of China’s purchasing managers’ index data release on Thursday. The reading is expected to reflect some impact from Beijing’s recent stimulus measures.