The U.S. dollar held its ground on Tuesday as investors stayed on the sidelines ahead of a wave of long-delayed economic releases. The upcoming numbers could be pivotal in determining whether the Federal Reserve cuts rates at its December meeting.
At 04:15 ET, the Dollar Index was nearly unchanged at 100.072.
Market Pauses Before Key Reports
Comments from Fed Governor Christopher Waller on Monday — echoed by New York Fed President John Williams — strengthened expectations for another quarter-point rate cut next month. Market pricing has shifted sharply, with odds of a December move now at 81%.
Even so, minutes from the most recent Fed meeting showed a divided committee, making the backlogged data all the more critical.
Investors will receive September readings on PPI and retail sales today, followed by the PCE inflation gauge on Wednesday. With October figures unlikely to ever be released, these will be the last data points available before the Fed meets.
ING analysts wrote that “markets are back to pricing in 19bp of easing for December, but the dollar has remained resilient.” They added that year-end flow adjustments may be supporting the currency, but that “the dollar looks too strong” compared with short-term rate spreads, presenting downside risk.
Euro Still Struggling Despite Peace Talks
EUR/USD edged modestly higher early Tuesday, but fresh German data confirmed zero growth in Q3 and underscored a downbeat fourth-quarter outlook after Monday’s weak Ifo survey.
ING noted that “the EUR is yet to see any real benefit from the Ukraine peace talks,” adding that the currency is trading at a 2% undervaluation versus the dollar.
GBP/USD also nudged up ahead of Wednesday’s U.K. budget, with expectations that Finance Minister Rachel Reeves may raise taxes while trying not to further derail sluggish growth.
Yen Remains Under Intervention Watch
USD/JPY eased but stayed at levels associated with previous official action. Though Japanese authorities have issued verbal warnings, they have not yet stepped into markets.
ING said “thinner liquidity around Thanksgiving could present good conditions for the BoJ to intervene,” though they do not expect today’s U.S. data to be the trigger.
Meanwhile, the yuan strengthened slightly as USD/CNY dipped, supported by hopes of thawing relations before President Donald Trump’s planned visit to Beijing in April.
AUD and NZD both softened ahead of the Reserve Bank of New Zealand decision.