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The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar (USD) against six other major currencies, has recovered its intraday losses and was trading around 104.30 in early European trading on Tuesday. Support for the dollar was provided by higher U.S. Treasury yields, with the 2-year and 10-year Treasury yields at 4.52% and 4.25%, respectively, at press time.
The U.S. dollar (USD) has come under pressure as market expectations for a September rate cut by the Federal Reserve (Fed) have grown. Last week, Fed Chairman Jerome Powell noted that three U.S. inflation data this year have “added some confidence” that inflation is on track to reach the Fed’s target on a sustained basis, meaning that rate cuts could be imminent.
In addition, New York Federal Reserve President John Williams said on Friday that the long-term trends that led to a lower neutral interest rate before the pandemic remain valid. “My own Halston-Laubach-Williams estimates of neutral interest rates in the U.S., Canada and the eurozone are about where they were before the pandemic,” Williams said, according to Bloomberg.
In U.S. politics, Democrats are backing Vice President Kamala Harris as the leading candidate for the presidential nomination. Harris has secured the support of a majority of pledged delegates to the Democratic convention, according to NBC News projections. The threshold for the nomination is 1,976 delegates, and NBC estimates Harris has secured the support of 1,992 delegates through verbal or written endorsements.
Later this week, traders may focus on the release of global Purchasing Managers Index (PMI) and Gross Domestic Product (GDP) data. These data could provide new insights into the state of the U.S. economy.
