The US Dollar held close to a three-week high against major currencies on Tuesday, as markets looked ahead to the release of US inflation data later in the day, which may offer insights into future monetary policy direction.

The greenback was also supported by high Treasury yields, with investor sentiment influenced by speculation over a possible departure of Federal Reserve Chair Jerome Powell, amid ongoing criticism from President Donald Trump.

Meanwhile, currencies were largely unmoved by data showing China’s economy expanded by 5.2% in the last quarter, slightly above analysts’ expectations.

The Dollar was mostly steady at 147.62 Yen, after briefly climbing to 147.89 Yen, its highest level since 23^rd June.

Meanwhile, the Dollar index, which measures the US currency against six peers, dipped slightly to 98.003, just below its overnight high of 98.136, the strongest reading since 25^th June.

The Euro inched up to $1.1681, recovering slightly after slipping to $1.1650 on Monday, its lowest level since 25^th June, Reuters reports.

Federal Reserve Chair Jerome Powell has indicated that he expects inflation to rise over the summer due to the impact of tariffs, a development that is likely to keep the central bank from adjusting interest rates until later in the year.

According to a Reuters poll, economists anticipate headline inflation to climb to 2.7% year-on-year, up from 2.4% the previous month. Core inflation, which excludes food and energy, is also expected to rise to 3.0%, compared to 2.8% previously.

“Should inflation fail to materialise or remain steady, questions may arise regarding the Fed's recent decision not to cut rates, potentially intensifying calls for monetary easing,” stated James Kniveton, senior corporate FX dealer at Convera.

“Calls from the White House for leadership changes at the Fed may increase.”

On Monday, President Trump intensified his criticism of Fed Chair Jerome Powell, arguing that interest rates should be at 1% or lower, instead of the current 4.25% to 4.50% range maintained by the Federal Reserve throughout the year.

In the meantime, Fed funds futures traders are anticipating roughly 50 basis points of rate cuts by the end of the year, with the first 25-basis-point cut widely expected in September.

“If Powell leaves, we expect the (US Treasury yield) curve to steepen sharply, with the short-end factoring in front-loaded rates cuts,” according to DBS analysts.

“Meanwhile, the loss of confidence in price stability should translate into sharply higher 10-year and 30-year yields.