Trade war fallout concerns weighed on markets. The euro dipped below $1.12 to a three-week low against a stronger dollar on Tuesday.
Investors re-assessed their expectations of how much the Federal Reserve may cut interest rates by this month. The nomination of IMF Chairwoman Lagarde as the new head of the European Central Bank added to market participants’ worries. There are concerns that the ECB would be inclined to ease monetary policy faster than its U.S. counterpart.
The common currency fell to its lowest since mid-June at $1.1193.
The dollar index, which measures the greenback against a basket of other currencies, rose 0.2% to 97.554, a three-week high.
Expectations of a 50-basis-point cut by the Fed have fallen to 4.9% from 25% seen last week, according to the CME FedWatch Tool. Investors also think there is a higher chance the Fed will not cut rates at the September meeting.
A cooling in the U.S.-China trade dispute since the G20 summit in Japan has also added to dollar strength. In the long run, however, hopes of better relations between the United States and the rest of the world could dampen appetite for the dollar. The greenback has benefited from safe-haven flows, as could rising expectations of slower U.S. economic growth.
Traders are now focused on Federal Reserve Chairman Jerome Powell’s Congressional testimony, due on Wednesday and Thursday, as well as U.S. inflation data out later this week.
START TRADINGForex – Trade war fallout concerns – Euro dips
Sterling dropped to a new six-month low of $1.2457. Brexit jitters and growing expectations of a BoE rate cut adding to sterling’s weakness. Excluding January’s “flash crash”, the currency is close to lows last seen in April 2017.
Pound set for tenth weekly consecutive loss vs euro. The British pound fell towards its lowest levels in more than two years on Tuesday against the backdrop of a worsening economic outlook and rising fears about a no-deal Brexit and a new Prime Minister. The pound also weakened against the euro to a six-month low at 89.95 pence.
Oil prices edged further above $64 a barrel on Tuesday as OPEC supply cuts and Middle East tensions countered the U.S.-China trade dispute that has been dragging down the global economy and oil demand.
Brent crude futures rose 15 cents to $64.26 a barrel by 1325 GMT. U.S. West Texas Intermediate crude was up 9 cents to $57.75.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money