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By Peter Nurse
Investing.com - The U.S. dollar edged higher in early European trade Tuesday, but traded just above a seven-month low as traders looked to a speech from Fed chair Jerome Powell for more clarity over the central bank's rate hike cycle.
At 03:15 ET (08:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 102.960, after falling to a seven-month low of 102.93 in the previous session.
The dollar has been under pressure following Friday's data, with the jobs report showing a slowdown in wage growth as well as the first contraction in U.S. services industry activity in more than two years.
This has raised expectations that the U.S. central bank will tone down its aggressive monetary tightening policy when it next meets in early February.
Federal Reserve Bank of San Francisco President Mary Daly said Monday the central bank could either raise rates by 50 basis points for a second straight time or slow down to a quarter-point hike.
"Doing it in more gradual steps does give you the ability to respond to incoming information," said Daly, adding she expects the central bank to raise interest rates to somewhere above 5% before pausing.
Fed Chair Jerome Powell is scheduled to speak later Tuesday at a bank symposium in Sweden and could provide further clarity on the pace of rate hikes ahead of U.S. inflation data out on Thursday.
Elsewhere, EUR/USD edged 0.1% higher to 1.0741, near the previous session's seven-month peak of 1.0760, helped by French industrial production climbing 2.0% on the month in November.
This was better than the 0.8% growth expected, and a healthy improvement from the revised drop of 2.5% the prior month, raising hopes that the slowdown in the Eurozone in 2023 may be milder than first feared.
GBP/USD dropped 0.1% to 1.2170, after hitting a three-week high of 1.2209 on Monday. There was also positive economic news in the U.K. overnight, as retail sales rose 6.5% last month compared with a year earlier, according to data from the British Retail Consortium and KPMG.
USD/JPY rose 0.1% to 132.00, with the yen slipping even as data showed inflation in Tokyo grew more than expected in December, putting more pressure on the Bank of Japan to tighten monetary policy in the near future.
USD/CNY rose 0.1% to 6.7811, with the Chinese yuan close to a four-month high after China relaxed most anti-COVID measures and reopened its international borders, while AUD/USD 0.1% to 0.6902.
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