Dollar Holds Steady as Markets Await Key Economic Data

Dollar in the U.S. remained stable on Tuesday as investors looked ahead to crucial economic data, including Friday’s U.S. payrolls report, which could confirm an interest rate cut by the Federal Reserve later this month.

As of 04:05 ET (09:05 GMT), the Dollar Index, which tracks the dollar against a basket of six major currencies, was largely unchanged at 101.617, just below Monday’s two-week high of 101.79. The index declined by 2.2% in August on expectations of U.S. interest rate cuts.

The U.S. ISM manufacturing survey, due later in the session, is expected to show the manufacturing sector remains in contraction.
This week, the labor market is the focal point as Federal Reserve policymakers seek confirmation that it’s time to ease monetary policy. Fed Chair Jerome Powell recently hinted at an imminent rate cut due to labor market concerns.

Friday’s nonfarm payrolls report will be the most important data point of the week, especially after last month’s disappointing labor report triggered a selloff in equity markets over recession fears. Before that, job openings data on Wednesday and the jobless claims report on Thursday will also be closely watched.

Markets currently expect a 69% chance of a 25 basis point cut when the Federal Reserve meets on September 17-18, with a 31% chance of a 50 basis point cut, according to the CME FedWatch tool.

Euro Nears Two-Week Low
In Europe, the EUR/USD pair slipped 0.1% to 1.1061, close to the two-week low of 1.1042 reached in the previous session after data showed eurozone manufacturing remained in contraction in August.
The European Central Bank cut interest rates in June and is likely to do so again this month, especially after eurozone inflation fell to 2.2% in August, a three-year low.

GBP/USD dropped 0.2% to 1.3129, with the U.K. data calendar relatively quiet this week. The pound gained over 2% last month, supported by expectations that the Bank of England will maintain higher interest rates longer than in the U.S. and eurozone.

Yen Rebounds
In Asia, USD/JPY fell 0.6% to 146.03, retreating from Monday’s two-week high of 147.16 after data showed Japan’s factory activity contracted again in August. USD/CNY traded flat at 7.1161, while AUD/USD dropped 0.6% to 0.6750 ahead of Australia’s GDP report due on Wednesday.

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