The US Dollar edged down on Tuesday on a marginal rally in risk appetite, yet remained within tight ranges against key rivals ahead of inflation data from major economies out this week.
The Euro increased 0.16% to $1.0877 despite dovish European Central Bank (ECB) policymaker comments on Monday and data revealing business morale in Germany stagnated this month.
“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,” stated Rodrigo Catril, senior FX strategist at National Australia Bank.
“Obviously, the inflation dynamics will set the tone in terms of what to expect.”
Furthermore, Sterling hit a two-month high on Tuesday, and at the time of writing stood at $1.2778.
The New Zealand Dollar also reached a two-month top to trade at $0.6161, whilst in Australia, the Aussie rose 0.2% to $0.6668, ahead of consumer price index data for the country out on Wednesday.
In the US, the core personal consumption expenditures (PCE) price index report will be published on Friday, and is forecast to remains steady, Reuters reports.
Recent data from the world's largest economy has been inconsistent, fluctuating between strong and weak performances, which has shaken policymakers' confidence regarding the timing and extent of the anticipated rate cuts this year.
“The market is well priced for a benign number, and that needs to be delivered… for current Fed cut expectations for this year to be sustained,” Catril added.
“Any number that surprises on the topside, we think, will provide quite a big reaction in terms of a move up in US yields and for the Dollar to rip higher.”
The Dollar index, measuring the currency against six rivals, was down 0.12% at the time of writing to 104.43.
Elsewhere, in Japan, the Yen remained close to the 157 per Dollar mark, and last stood at 156.67 per Dollar.