US dollar tries to recoup ahead of crucial US data

The US dollar rose in European trade on Wednesday against a basket of major rivals, moving away from two-month lows as US 10-year treasury yields rebounded. 

Now investors await crucial US data later this week which could provide clues on the path ahead for Fed interest rates in the first half of the year.

The Index

The dollar index rose 0.25% today to 106.55, with a session-low at 106.17.

On Tuesday, the index lost 0.4%, resuming losses and rebounding from a two-month trough at 106.13.

The losses came as US treasury yields tumbled back then following weak US consumer sentiment data.

US Yields

US 10-year treasury yields rose 0.7% on Wednesday away from 11-week lows at 4.283%, on track for the first profit in six sessions.

As Trump prepares to enforce his tariffs on Mexico and Canada next week, inflationary pressures are expected to mount on the Federal Reserve, which would likely lead to interest rates being held at current levels for an extended duration this year.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at 2.5%.

Now traders await GDP growth and personal spending data this week, in addition to a host of remarks by Fed officials.