The U.S. dollar posted a moderate recovery against most major currencies on Tuesday, with the dollar index (USDX) taking back part of the losses seen in the previous session, to end the day 0.13% higher supported by hawkish comments from Federal Reserve officials as well as data showing a stable housing market in the world's largest economy, both suggesting that the central bank will not be in a rush to begin its rate-cutting cycle.
Fueled by steady growth in April, home prices remain on the rise whereas consumer confidence dipped slightly in June, but the impact on the dollar was minimal.
A September rate cut is the most likely scenario for the Fed, according to market expectations reflected in the CME FedWatch Tool (nearly 60%) while November is also seen as a strong possibility (over 50%).
In other news, oil prices are trading in a tight range for the past week, hovering around price levels last seen in April, driven by geopolitical risks from the Middle East conflict as well as expectations of improving demand and falling inventories in the U.S during the third quarter peak demand season.
Supported by a surge in NVIDIA (up nearly 7%) following three sessions of steep losses, Wall Street closed higher on Tuesday. The tech-heavy indices are regaining momentum towards record highs, while cyclical sectors remain subdued ahead of inflation data (PCE) on Friday.
The spotlight is on economic data today as the UK's CBI releases its Realized Sales index, surveying retailers and wholesalers. In the US, keep an eye out for New Home Sales data and weekly updates on crude oil inventories. Later this week the focus will shift to US GDP numbers and pending home sales due on Thursday while the main focus will be on Friday’s inflation data.
EUR/USD
The EUR/USD pair traded within familiar levels on Tuesday ending the session with losses of 0.21%. Momentum is set to remain thin as markets await fresh data to drive market flows beginning on Thursday.
On Wednesday, European Central Bank (ECB) Chief Economist Philip Lane is expected to deliver some talking points during the European market session.
The US will also release the latest Bank Stress Test results, but performance is not expected to wildly deviate from previous runs through the Federal Reserve’s stress test of the US banking system.
Thursday will kick off the week’s data releases in earnest, with final pan-EU Consumer Confidence figures for June as well as a revision print for Q1’s US Gross Domestic Product (GDP) print.