Investing.com – The U.S. dollar rose on Tuesday as Federal Reserve Chairman Jerome Powell reduced the likelihood of another too-big interest rate cut, while the euro fell ahead of the release of the latest euro zone inflation data.

At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was up 0.2% at 100,737, after gaining 0.3% overnight.

Hawkish Powell helps the dollar

The chairman of the Federal Reserve signaled that the US central bank would continue to cut interest rates, but indicated that it would likely stick to quarter-point rate cuts.

“The 50 basis point cut in September means that market prices are structurally more dovish, perhaps also assuming that the Fed would not want to underperform on monetary easing if the 50 basis point move was priced in before the FOMC date ” – ING analysts said in a note.

“Powell said the base case scenario is two moves of 25 basis points by the end of the year, which is an extremely specific indication and signals his dissatisfaction with dovish market prices,” ING added. “The balance of risks in the near term is likely to tilt in favor of the dollar.”

This widely viewed monthly magazine will be published on Friday. The U.S. economy is expected to have added 144,000 jobs last month.

Weaker-than-expected data may revive fears about the prospect of a recession, while unexpectedly forceful job growth may raise concerns that the Fed will not cut interest rates as deeply as expected.

The euro is preparing to publish information on inflation

In Europe, it fell 0.1% to 1.1120 ahead of the release of the latest number later in the session amid hopes of further interest rate cuts by the European Central Bank at the end of the year.

Data released on Monday showed that inflation in Germany fell slightly more than forecast in September to 1.8%, just below the forecast of 1.9%, before consumer prices rose year-on-year by 2.0% in August.

Inflation is also falling in France, Italy and Spain, which suggests that the risk to the euro zone forecast of 1.8% annual growth in September is lower.

European Central Bank President Christine Lagarde told parliament on Monday that “recent events strengthen our confidence that inflation will return to the target in due course” and this should be reflected in the policy decision on October 17.

fell 0.2% to 1.3340, retreating further from last week’s high of 1.3430, climbing to a level not seen since February 2022.

Jen loses BOJ after minutes

rose 0.4% to 144.16 after the Bank of Japan’s July meeting showed policymakers were divided on how quickly the central bank should raise interest rates further, highlighting uncertainty over the timing of the next boost in borrowing costs.

At its July meeting, the Bank of Japan unexpectedly raised short-term interest rates to 0.25% by a 7-2 vote, another step toward the end of a decade of massive stimulus.

rose to 7.0185, with serene yuan trading, and Chinese markets are currently closed until Tuesday next week, when the country celebrates Golden Week.