The US dollar was resilient on Tuesday, with traders cautious ahead of a heavy macroeconomic calendar.
The currency’s resilience came as US markets reopen after the holiday, leaving attention on the ISM Manufacturing index due later today.
Consensus points to a modest improvement to 49, which would nonetheless mark a sixth straight month below the 50 expansion threshold.
Any upside surprise could reinforce the dollar by signalling economic resilience, while weaker data may add to pressure from mounting rate-cut expectations.
Politics remains a source of noise. Debate over the Federal Reserve’s independence has intensified after President Donald Trump’s efforts to remove Governor Lisa Cook. While Treasury Secretary Scott Bessent underlined that the Fed “is and should be independent,” he also criticized past mistakes. Such headlines have amplified concerns over the institution’s credibility and could drive yields up.
From a monetary policy perspective, investors remain focused on the Fed’s next steps after recent dovish remarks from San Francisco Fed President Mary Daly. Markets continue to price nearly a 90% probability of a 25-basis-point rate cut at the September meeting.
Treasury yields extended their rebound for a second consecutive day, with the 10-year rising above 4.27%. The market remains highly sensitive to incoming data, and upcoming labour indicators, including ADP employment, JOLTs job openings, and Friday’s nonfarm payrolls will be decisive. Softer readings could drag yields and the dollar lower, while resilient results may reinforce expectations of economic strength and provide support for both.
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