Investing.com – The U.S. dollar remains stable in early European trade on Tuesday, supported by increased geopolitical tensions but staying close to recent lows as the Federal Reserve prepares for interest rate cuts.
At 04:55 ET (08:55 GMT), the Dollar Index, tracking the greenback against a basket of six other currencies, was slightly higher at 100.750, just above the 13-month low from the previous session.
Labor Market Data Impacting Dollar Movement
The dollar has seen a slight uptick due to rising geopolitical tensions in regions like the Middle East, Libya, and Ukraine, leading to some safe-haven demand for the currency.
However, this increase is limited as investors focus on potential U.S. rate cuts, especially after Federal Reserve Chair hinted at such a move in his recent Jackson Hole speech.
Deutsche Bank economists noted that the size of the rate cut at the upcoming September meeting will depend on labor market data, with expectations of a 25 basis points reduction.
German Economy Contracts in Q2
Elsewhere, the euro traded slightly higher at 1.1172, near its recent multi-month high.
Recent data revealed that the German economy contracted by 0.1% in the second quarter of 2024, with year-on-year change revised to 0.0%.
The European Central Bank’s upcoming decision on interest rates will be influenced by August data, which could impact the EUR/USD exchange rate.
The British pound also saw gains against the dollar, despite Bank of England Governor expressing concerns about inflation.
Yen’s Rally Pauses
In Asia, the yen rose slightly to 145.12, while the Chinese yuan traded higher at 7.1289, despite concerns over import tariffs on Chinese goods.
Overall, global currency movements are impacted by geopolitical tensions, central bank decisions, and economic data releases, shaping the future direction of exchange rates.