The U.S. dollar advanced on Tuesday as trading resumed after a long holiday weekend in the United States, with investors preparing for a series of important economic releases. Meanwhile, the British pound and Canadian dollar drew attention following fresh domestic data.
By 13:18 ET (18:18 GMT), the Dollar Index — which measures the greenback against six major peers — was up 0.3% at 97.24, building on a 0.2% rise in the previous session.
Several Asian markets, including China, remained closed for holidays, while U.S. markets reopened after the observance of George Washington’s birthday.
Dollar firms ahead of economic releases
Analysts at ING noted that the U.S. holiday led to a relatively subdued start to the week, but the dollar still found support. They pointed to what they described as a short-term undervaluation of the currency, suggesting that even in calm trading conditions it had room to strengthen.
Market participants are now looking toward a busy calendar of U.S. data, highlighted by the minutes from the Federal Reserve’s January meeting, scheduled for release Wednesday. At that meeting, the Fed kept interest rates steady and cautioned that inflation and labor market risks persist. Since then, employment and consumer price figures have delivered mixed signals about the health of the U.S. economy.
Attention is also turning to ADP payroll figures and the Empire Manufacturing survey. Later in the week, December’s PCE price index — the Fed’s preferred inflation gauge — will be closely watched, as it plays a key role in shaping longer-term interest rate expectations.
Pound and Canadian dollar under scrutiny
In Europe, GBP/USD slid 0.7% to 1.3545 after new data pointed to continued cooling in the U.K. labor market. According to the Office for National Statistics, the unemployment rate rose to 5.2% in the three months through December, up from 5.1% previously and marking its highest level since early 2021.
At the same time, wage growth excluding bonuses slowed to an annual 4.2%, down from 4.5% in the prior period. Economists suggest the softer labor market and moderating pay pressures could strengthen expectations that the Bank of England will deliver additional interest rate cuts in the months ahead, especially if inflation continues to ease toward target.
Elsewhere in Europe, EUR/USD slipped 0.1% to 1.1842 as investors awaited Germany’s latest ZEW economic sentiment survey, which is forecast to show improving confidence in the euro area’s largest economy.
In Canada, USD/CAD edged up 0.1% to 1.3646. Government figures showed annual inflation easing to 2.3% in January from 2.4% in December. Analysts had anticipated softer price pressures, partly reflecting currency effects and shifting domestic demand dynamics. Some economists argue that the Bank of Canada may now be positioned for an extended pause, with any potential rate increase likely further out, depending on how growth and labor market conditions evolve.
Yen steadies after weak GDP
In Asia, USD/JPY was broadly unchanged at 153.37. The Japanese yen recovered modestly after sharp losses in the prior session, despite data showing that Japan’s fourth-quarter economic growth fell well short of expectations. The weaker reading fueled speculation about possible additional stimulus from Tokyo.
However, reports suggesting that the Bank of Japan could consider raising interest rates as early as April provided some support for the currency.
The Chinese yuan remained near three-year highs against the dollar, with onshore markets closed for the holiday period.
Meanwhile, AUD/USD edged up to 0.7072. Minutes from the Reserve Bank of Australia’s February meeting indicated policymakers were not firmly committed to further rate hikes after raising rates by 25 basis points, though they emphasized ongoing concerns about persistent inflation and signaled readiness to tighten again if necessary.
