The US dollar strengthened against major currencies on Tuesday as investors and traders awaited the US debt ceiling discussion and new inflation data for a clearer picture of the outlook for the US economy and interest rates.
Data on Tuesday showed China's imports contracted sharply in April from a year earlier while exports grew more slowly than in March. Waima so it has a limited effect on the currency.
U.S. inflation data. closely watched Wednesday will likely set the tone for the market, after last week's stronger-than-expected jobs data.
Any Fed policy changes will need to be weighed against the backdrop of recent turmoil in the U.S. banking sector. and the political deadlock in Washington over the resolution of the national debt ceiling, analysts said.
"Overall, the data shows that there is no final word yet that the Fed will not raise rates again although we agree with market prices that there are higher hurdles now especially with the upcoming US debt ceiling limit," currency analysts at MUFG
The Federal Reserve's quarterly survey of bank lending officers on Monday showed that credit conditions for U.S. businesses and households are improving. continued to be tight at the beginning of the year.
The survey was among the first measures of sentiment in the banking sector since the recent bank failures, triggered by the collapse of Silicon Valley Bank in March.
Compared to a group of major currencies, the US Dollar Index strengthened again with a strengthening of 0.43% to a trading level of 101.595. The euro lost 0.53% to a trading level of 1.0946.
The sterling currency also fell by 0.22% against the US dollar. The Bank of England looks set to raise interest rates to 4.5%, as it tries to fight the highest inflation rates in Western Europe.
Kenneth Broux, head of corporate research for FX and rates at Societe Generale, said sterling had held up better than the euro compared to the US dollar likely because of the hawkish tone from the BoE alongside the expected rate hike.
