Dollar Steadies as Markets Await U.S. Inflation Report

The dollar has stabilized against the yen and held against the euro and sterling as markets await a U.S. inflation report. A moderate inflation reading could support expectations for a Fed interest rate cut. Meanwhile, Fed officials express concerns over labor market weakness.

The U.S. dollar strengthened slightly against the yen on Tuesday and remained steady against the euro and sterling. Investors are awaiting a key U.S. consumer inflation report today that could influence expectations for a Federal Reserve interest rate decision. A moderate inflation print might solidify expectations for a Fed rate cut, although tariffs under U.S. President Donald Trump's trade policies could complicate the decision.

In early trading, the dollar added 0.2% against the yen, while the euro edged higher and sterling dipped slightly. The dollar index held steady after recent gains, following anticipations of policy easing at the Federal Reserve. Speculation had grown after dovish candidates were suggested for the Fed's leadership positions.

Further signaling potential rate cuts was the apparent concern among Federal Reserve officials about the fragility of the U.S. labor market. Market odds show an 89% likelihood of a rate cut in September. Amid geopolitical pressures, including the U.S.-China trade tensions, the market's focus remains on upcoming economic indicators.

(With inputs from agencies.)