US Dollar rangebound as market awaits data releases

On Tuesday, the dollar grappled with direction as investors exercised caution ahead of impending inflation data scheduled for Wednesday. Concurrently, U.S. Treasury yields surged after markets tempered their expectations for future Federal Reserve rate cuts.

The yen lingered near multi-decade lows, prompting traders to remain vigilant for any indications of intervention.

The U.S. dollar concluded last week on a lower note as traders assimilated mixed economic data, which included an unexpected deceleration in U.S. services expansion alongside job growth in the U.S. that surpassed expectations.

The dollar index, which gauges the currency against six major counterparts, increased by 0.01% to reach 104.12.

The U.S. consumer price inflation data for March, scheduled for release on Wednesday, will offer additional insights into the Federal Reserve's policy trajectory.

Dallas Fed President Lorie Logan remarked on Friday, following the release of jobs data, that an inflation landscape increasingly rife with upside risks argued against any imminent move towards easier monetary policy. Meanwhile, Bank of Chicago President Austan Goolsbee stated on Monday that the Fed must assess how much longer it can uphold its current rate stance without causing harm to the economy.

The U.S. dollar gained 0.03% to reach 151.85 yen, maintaining its position near a 34-year high of 151.975 yen reached last month, amidst ongoing efforts by Japanese officials to bolster the currency.

Finance Minister Shunichi Suzuki stated on Tuesday that authorities would consider all options to address excessive yen movements, reiterating his caution that Tokyo is prepared to take action against sharp declines in the currency. The specter of intervention has prevented the dollar from surpassing the closely-monitored 152 yen threshold, despite the upward trajectory of U.S. Treasury yields, which typically closely correlate with the dollar/yen pair.

Also on Tuesday, Bank of Japan Governor Kazuo Ueda said the central bank must consider reducing the degree of monetary stimulus if inflation accelerates.

The euro saw a slight decrease, reaching $1.0858, while sterling was at $1.2662, down by 0.07% for the day.

A survey by the European Central Bank revealed that Eurozone banks reduced their standards for mortgage approvals last quarter for the first time in over two years. However, despite this easing, demand for credit continued to decline due to high borrowing costs and a stagnant economy.

Analysts anticipated that the European Central Bank would maintain interest rates this week, while emphasizing that ECB decisions would continue to hinge on incoming data. Market expectations suggest that the ECB might make its initial move in June, with at least three rate cuts of 25 basis points anticipated by the end of the year.

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