The dollar maintained its strength on Tuesday as markets anticipated signals, expected later this week, regarding the possible timing of rate cuts by the Federal Reserve. The yen reduced its losses from the previous day as disappointing Japanese economic data heightened expectations for increased government stimulus measures. The Australian dollar dipped following the publication of the Reserve Bank of Australia’s minutes from its February meeting. Market activity was subdued as numerous Asian markets remained closed for the Lunar New Year holiday, coinciding with the President’s Day holiday in the United States. Important economic developments are scheduled for later in the week, including the minutes from the Fed’s most recent meeting and preliminary data on U.S. gross domestic product. “We’re quite positive on the U.S. economy,” stated Kristina Clifton. “The market is presently reflecting a strong likelihood of a June interest rate cut, which aligns with our perspective.” Nonetheless, our outlook diverges from the market as we anticipate an additional reduction in July. It is our assessment that the primary influence on the dollar leading up to 2026 will be the story of U.S. exceptionalism,” she noted.

The dollar index, reflecting the performance of the greenback against a selection of currencies, remained steady at 97.12, following a 0.2% increase in the prior session. The euro decreased by 0.06%, now standing at $1.1843. The yen appreciated by 0.15%, reaching 153.28 against the dollar. The value of the pound declined by 0.07%, settling at $1.3616. Data released on Friday indicated that U.S. consumer prices rose less than anticipated in January, providing the Federal Reserve with more flexibility for potential policy adjustments this year. Market participants are anticipating 62 basis points of easing for the remainder of the year, suggesting two quarter-point reductions and approximately a 50% likelihood of a third cut. The upcoming reduction is anticipated in June, with markets indicating an 80% probability of a 25-basis-point cut.

The minutes from the January meeting of the Federal Open Market Committee will be released on Wednesday. This week’s important data highlights include inflation figures from Britain, Canada, and Japan, along with preliminary assessments of global business activity set to be released on Friday. A recent rally in the yen came to a halt on Monday as official figures revealed that Japan’s economy experienced minimal growth last quarter, achieving an annualised expansion of just 0.2%. The Australian dollar declined by 0.07% against the US dollar, settling at $0.7064. New Zealand’s kiwi declined 0.08% to $0.6026 in anticipation of the Reserve Bank of New Zealand’s policy meeting on Wednesday, where a steady rate is widely expected.

Australia’s central bank determined that inflation would remain persistently elevated if it had not raised interest rates this month, and it remains uncertain whether additional tightening will be required. Minutes from the RBA’s board meeting held last month indicated that members expressed concerns regarding the significant changes in the risks associated with its inflation and employment mandates. In the realm of cryptocurrencies, bitcoin experienced a slight increase of 0.05%, reaching $68,881.72, whereas ether remained relatively stable at $1,999.11.