Investing.com - The U.S. dollar strengthened on Tuesday as Federal Reserve Chair Jerome Powell hinted at continued interest rate cuts, but at a slower pace, boosting the dollar's appeal. Meanwhile, the euro weakened ahead of the eurozone inflation data release.
At 04:10 ET (08:10 GMT), the Dollar Index rose by 0.2% to 100.737, following a 0.3% increase overnight, tracking the greenback against a basket of major currencies.
Hawkish Powell Boosts Dollar
Powell's comments suggested that the Fed will stick to quarter-point rate cuts, signaling a less dovish stance than what the market had priced in with expectations of larger cuts. The specific guidance provided by Powell indicates a possible upside for the dollar in the near term.
The release of the U.S. monthly jobs report on Friday will be closely watched, with anticipation for 144,000 new jobs added last month. Any deviation from this forecast could impact market expectations for future rate cuts.
Euro Awaits Inflation Data
The euro slipped by 0.1% to 1.1120 ahead of the eurozone inflation data release, with expectations of further interest rate cuts by the European Central Bank. Recent data from Germany, France, Italy, and Spain suggest easing inflation, posing downside risks to the eurozone growth forecast.
ECB President Christine Lagarde's comments reinforced expectations of inflation returning to target, potentially influencing the Oct. 17 policy decision. The euro retreated further from recent highs against the dollar.
Yen Weakens after BOJ Minutes
The yen rose by 0.4% to 144.16 following the Bank of Japan's July meeting minutes, revealing a division among policymakers on the pace of future interest rate hikes. The BOJ's decision to raise short-term rates to 0.25% by a 7-2 vote indicates a gradual shift away from extensive stimulus measures.
The Chinese yuan remained stable as markets closed for Golden Week celebrations, trading at 7.0185.
Overall, the market sentiment remains cautious as central bank decisions and economic data releases continue to impact global currencies. Investors should monitor upcoming reports and policy decisions to gauge the future direction of currency movements.