© Reuters
Investing.com -- The dollar slipped Tuesday, but could hitch a ride higher in the near term as investor focus is likely to shift from the debt ceiling to the jobs report later this week that could cement the prospect of a further Federal Reserve hike next month.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.14% to 103.99.
As the odds of another 25-basis-point hike from the Fed at next month’s FOMC meeting grow, MUFG said Tuesday that another “strong employment report this week would further reinforce those expectations and encourage a stronger U.S. dollar in the near-term.”
Economists forecast data on Friday to show the U.S. economy created 180,000 new jobs in May, while average hourly earnings for the month are seen lower at 0.4% from 0.5%.
The growing prospect of another rate hike has been bolstered by economic data showing that inflation, particularly core services inflation, remains hot.
“The lack of progress will keep pressure on the Fed to keep hiking rates, although we continue to argue that the Fed has already done enough by raising the policy rate to just over 5.0% especially with credit conditions set to tighten more going forward as well,” MUFG added.
The expected shift in focus away from the passage of the debt ceiling comes as markets mostly believe that the U.S. lawmakers vote the debt-ceiling bill, or “Fiscal Responsibility Act,” into law and avoid a default.
“Now that a deal has been reached, it seems very likely to pass both chambers of Congress in the coming week,” Goldman Sachs said in a note.
The debt-ceiling bill, however, does face a race against a time after Treasury Secretary Janet Yellen warned that June 5 would be the so-called X-date, or the day the U.S. won’t be able to pay its bills.
