SINGAPORE- The dollar waned on Tuesday on a slight pick up in risk appetite, but remained in tight ranges against peers ahead of key inflation data from major economies this week that could inform the global interest rate outlook.
The euro rose 0.16 percent to $1.0877 despite some dovish comments from European Central Bank (ECB) policymakers on Monday and data showing German business morale stagnated in May.
German inflation data due on Wednesday and the wider euro zone bloc’s reading on Friday will be watched for confirmation of an ECB rate cut expected next week, and for clues on how soon subsequent easing from the central bank could come.
“The ECB is preparing itself for rate cuts next week, but the importance is what happens beyond that, and the lack of guidance from ECB speakers is telling in that sense,” said Rodrigo Catril, senior FX strategist at National Australia Bank.
“Obviously, the inflation dynamics will set the tone in terms of what to expect.”
Sterling and the New Zealand dollar both rose to over two-month highs. They last bought $1.2778 and $0.6161, respectively.
Down Under, the Aussie edged 0.2 percent higher to $0.6668. The country’s monthly consumer price index data is also due on Wednesday.
All of that data, however, will be a sideshow to the main focus for markets on Friday when US core personal consumption expenditures (PCE) price index report – the Federal Reserve’s preferred measure of inflation – is released. Expectations are for it to hold steady on a monthly basis.
The outlook for US rates has been the dominant driver of currency moves over the past few years and recent data from the world’s largest economy has blown hot and cold, denting policymakers’ confidence on the pace and scale of rate cuts expected this year.
