USD appreciated slightly against most of its major counterparts in the European session on Tuesday as investors’ focus shifted to the Federal Reserve chair Jerome Powell’s congressional testimony on monetary policy later in the day.
The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, advanced by 0.03% from the previous close to 105.04.
Powell will testify before the Senate Banking Committee at 14:00 GMT. Tomorrow, he will appear before the House Financial Services Committee. Investors will scrutinise the statements of the Fed chief for clues on the U.S. central bank’s plans for interest rates.
However, Thursday will bring a more important event - the release of the U.S. June inflation data - which could impact the Fed's decision-making. Economists expect the data will show the U.S. annual inflation rate slowed from 3.3% in May to 3.1% in June, the lowest level since January. If data justify the expectations, this will reinforce markets’ bets on a September interest rate reduction.
According to the CME FedWatch, markets see the chances of a rate cut in September at 77.1%.