FX.co ★ Dollar Holds Gains as Key Data Eyed

The dollar index traded above 97 on Tuesday, extending gains from the previous session as investors awaited a series of key US economic releases this week that could influence expectations for Federal Reserve policy. Market attention is centered on the minutes of the Fed’s most recent meeting, advance GDP figures, and the core PCE price index, the central bank’s preferred gauge of inflation.

The dollar came under pressure last week after softer-than-expected US inflation data strengthened expectations that the Fed will begin cutting interest rates later this year. Still, earlier figures showed US nonfarm payrolls posting their largest increase in more than a year, while the unemployment rate unexpectedly declined, pointing to a stabilizing labor market.

Futures markets currently price in a first rate cut in June, with about 62 basis points of total easing anticipated over the year. That implies two quarter-point cuts and roughly a 50% chance of a third move.