© Reuters
By Peter Nurse
Investing.com - The U.S. dollar edged higher in early European trade Tuesday, retaining its recent strength as traders await more economic clues as to the resilience of the U.S. economy and the likely policy response from the Federal Reserve.
At 03:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 104.002, not far removed from the six-week high of 104.67 hit on Friday.
Traders are likely to be out in force again Tuesday, after Monday’s U.S. holiday to celebrate Presidents’ Day, and will be looking to the release of more economic data to support the recent move higher in the dollar.
Tuesday’s key release will be PMI data for February, which are expected to show a small improvement from the previous month, but most eyes will be on the minutes of the last Fed meeting, earlier this month, due on Wednesday.
“The focus will be on how close the Fed was to hiking 50bp at that meeting,” said analysts at ING, in a note. “Watching Fed Chair Jerome Powell's press conference at that meeting, he came across as pretty relaxed and announced that the disinflation process had started. However, the market could be sensitive to suggestions that a 50bp hike had been a close call.”
Dollar bulls will also be keeping an eye on a press conference by Russian President Vladimir Putin as his invasion of Ukraine enters its second year. This follows U.S. President Joe Biden’s surprise trip to Kyiv on Monday, where he pledged his country’s support for as long as it is needed.
Elsewhere, EUR/USD fell 0.1% to 1.0667, ahead of the release of flash PMI data for the Eurozone as a whole. The region recorded surprise growth in the fourth quarter, as traders will be looking to see whether this economic bounce has continued even as the European Central Bank raises interest rates.
GBP/USD fell 0.2% to 1.2016, with the pound struggling even after the U.K. recorded an unexpected budget surplus of £5.42 billion in January, a month in which millions of Britons pay their income tax receipts.
USD/JPY rose 0.4% to 134.74, following mixed PMI data, with manufacturing activity shrinking far more than expected in February while service sector activity impressed.
Focus this week is on an address by Bank of Japan Governor nominee Kazuo Ueda, which is expected to shed more light on the bank’s ultra-loose policy this year.
AUD/USD fell 0.3% to 0.6882 after the minutes from the Reserve Bank of Australia's last meeting showed the policymakers had considered raising interest rates by 50 basis points, as it struggled to bring down inflation from overheated levels.
