Dollar under pressure in early trade

18 Jun 2024 , 08:45 AM

Tuesday saw a little decline in the dollar relative to the euro and sterling, continuing the previous day’s losses, as market concerns about the possibility of a far-right French administration subsided.

A jump in Treasury yields overnight did not help the US dollar, as investors were waiting for a significant retail sales report and remarks from Federal Reserve officials to get a better idea of when and how quickly interest rates will be lowered.

With the Reserve Bank of Australia expected to keep interest rates unchanged later in the day, the Australian dollar has been trading at the middle of its range over the previous month.

The U.S. dollar index, which compares the dollar to the euro, sterling, and four other major rivals, continued to decline from Friday’s 1 1/2-month high of 105.80, edging slightly lower to 105.26 in early Asian trading hours.

The sharp euro selloff that followed French President Emmanuel Macron’s unexpected call for an early election last week in response to his ruling centrist party’s crushing at the hands of Marine Le Pen’s eurosceptic National gain in the European Parliament elections was the main driver of the index’s gain.

In addition to the 0.26% gain from the previous session, the euro gained 0.04% to $1.0738. Sterling increased to $1.2712, up 0.06%.

The dollar was trading at 157.66 yen, barely moving.

The modest U.S. inflation data contrasted with the Fed’s generally hawkish posture at last week’s policy meeting, when they reduced their earlier median prediction for three quarter-point rate cuts this year to one, has caused the greenback to be dragged in both directions.

Patrick Harker, the president of the Philadelphia Fed, stated on Monday that he supports a single cut, but he did not rule out altering his mind in response to new information.

Later in the day, a number of Fed officials, including Susan Collins of the Boston Fed and Thomas Barkin of the Richmond Fed, will take the podium.

Prior to that, the Reserve Bank of Australia is largely likely to keep interest rates unchanged for the fifth consecutive meeting later on Tuesday, with the majority of analysts in a Reuters poll anticipating the first cut in the fourth quarter.

The Australian Dollar rose 0.08% to $0.66175. New Zealand dollar increased 0.08% to $0.6136.

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