US dollar rises ahead of crucial data
The US dollar rose in European trade on Tuesday against a basket of major rivals, resuming the gains and on track for multi-week highs as concerns about a US recession receded, with increasing signals of impending trade deals between the US and its partners.
Now investors await a batch of important US data, which would provide important clues on the odds of a Fed interest rate cut in the first half of the year.
The Index
The dollar index rose 0.4% today to 99.35, with a session-low at 98.94.
On Monday, the index lost 0.65% on profit-taking away from a week high at 99.94.
Trade Developments
US Treasury Secretary Scott Bessent stated on Monday that several trade partners provided “very good” proposals for trade deals to avoid tariffs, starting with India.
He said that recent steps by China to exempt some US goods from tariffs shows readiness to calm trading tensions.
The US administration is also expected to move on Tuesday to limit the scope of auto tariffs and parts to reduce the pressure on automakers.
US Rates
Several Fed officials recently signalled there’s no need to cut interest rates soon as the Fed continues to analyze new data to gauge the impact of US tariffs on the economy.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut stand at only 9%, while the odds of such a cut in June stand at 63%.
Gold moves in a negative zone before crucial US data
Gold prices fell in European trade on Tuesday under pressure from the stronger dollar against a basket of major rivals.
It comes ahead of important US data later today, which could provide fresh pricing for the odds of future Fed rate cuts.
The Price
Gold prices fell 1.1% today to $3305 an ounce, with a session-high at $3348.
On Monday, gold rose 0.7% and approached recent record highs at $3500.
US Dollar
The dollar index rose 0.4% on Tuesday, resuming gains against a basket of major rivals.
The gains come as concerns about a US recession receded, with trade tensions with major global partners calming down.
Trade Developments
US Treasury Secretary Scott Bessent stated on Monday that several trade partners provided “very good” proposals for trade deals to avoid tariffs, starting with India.
He said that recent steps by China to exempt some US goods from tariffs shows readiness to calm trading tensions.
The US administration is also expected to move on Tuesday to limit the scope of auto tariffs and parts to reduce the pressure on automakers.
US Rates
Several Fed officials recently signalled there’s no need to cut interest rates soon as the Fed continues to analyze new data to gauge the impact of US tariffs on the economy.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut stand at only 9%, while the odds of such a cut in June stand at 63%.
SPDR
Gold holdings at the SPDR Gold Trust remained unchanged yesterday at $946.27 tons, the lowest since April 9.
Sterling gives up three-year peak on profit-taking
Sterling declined in European trade on Tuesday against a basket of major rivals, while giving up the three-year high against the US dollar on profit-taking.
The pound marked strong gains on Monday after reports that the UK and the EU will soon sign a commitment to open and free trade, in a defiant step against US tariffs.
The Price
The GBP/USD price fell 0.35% today to $1.3394, with a session-high at $1.3444.
The pound rose 1% on Monday against the dollar, the second profit in three days, hitting a three-year peak at $1.3445.
Free and Open Trade
A Politico report indicated the UK and the EU will sign a declaration of commitment to free and open trade between both sides.
It’s viewed as a direct challenge to the latest aggressive US tariff policies on the EU and other trade partners.
The draft, which Politico previewed, would include promises to establish a new strategic partnership between London and Brussels, with an aim at keeping the stability of the global economic system.
UK Rates
As concerns of economic recession rise once more, pressures are renewed on most global central banks to cut interest rates and ease monetary policies.
The odds of a Bank of England 0.25% interest rate cut in May stand at 55% currently.
Now traders await a slew of new UK data on inflation, unemployment, and wages to gather more clues about the pace of rate cuts this year.
Yen resumes losses as eyes fixed on BOJ meeting
The Japanese yen fell in Asian trade on Tuesday against a basket of major rivals, resuming losses against the dollar after a short hiatus yesterday and moving once again towards two-week lows amid ongoing Japan-US trade negotiations.
The Bank of Japan will convene tomorrow to discuss the monetary policies, widely expected to hold interest rates unchanged while providing some clues on the future of policy normalization this year.
The Price
The USD/JPY rose 0.4% today to 142.49, with a session-low at 141.95.
The yen rose 1.2% on Monday against the dollar, recovering from a two-week trough at 144.03.
The yen also rebounded on haven demand amid uncertainty about the US-China trade negotiations.
Trade Talks
Asian countries such as Japan and South Korea are expected to seek temporary trade deals to avoid the return of strict US reciprocal tariffs in early July.
US Treasury Secretary Scott Bessent said the Trump administration is working on making trade deals with 17 trade partners, excepting China.
He reasserted the administration’s position that economic pressure will force China to the negotiation table, as they couldn’t handle 145% US tariffs.
US President Donald Trump said his team is very close to making a trade deal with Japan, however, Japan’s officials dismissed reports about talks to fix or change the forex rate between the yen and the dollar.
BOJ
The Bank of Japan is convening this week to discuss the monetary policies, expected to hold interest rates flat at 0.5%, the highest since 2008.
The BOJ will discuss the impact of the US trade war on the exports-reliant Japanese economy, which could determine the pace of rate hikes in the near future.