Dollar Recovers After Steep Losses, Euro Dips on Weak German Employment Data

The U.S. dollar rebounded in early European trading on Tuesday, reversing overnight declines. The euro weakened following the release of disappointing German employment figures.

At 04:45 ET (08:45 GMT), the Dollar Index, which measures the greenback against a basket of six other currencies, rose 0.1% to 104.165, after briefly falling below 104 for the first time since April 9th.

JOLTs Data Takes Center Stage

The dollar found support after experiencing sharp losses earlier in the week due to data indicating a slowdown in manufacturing activity and unexpected declines in construction spending.

These signs of economic weakness have increased the likelihood of the Federal Reserve cutting interest rates later this year. Fed funds futures now suggest a roughly 59% chance of a rate cut in September, up from 55% on Friday.

Later today, investors will focus on the JOLTs job openings report for April, a key indicator of the U.S. labor market’s health and a precursor to Friday’s crucial monthly payrolls figures.

Euro Weakens on Disappointing German Employment Data

The EUR/USD pair traded 0.1% lower at 1.0888, retreating from its earlier high of 1.0916, the highest level since March 21st.

This decline follows data revealing a larger-than-expected increase in unemployment in Germany in May. The number of unemployed individuals rose by 25,000 in seasonally adjusted terms, exceeding expectations of a 10,000 increase.

The European Central Bank (ECB) has signaled an interest rate cut at its upcoming meeting on Thursday, but the recent uptick in inflation data may prompt officials to reconsider the timing of further easing.

GBP/USD also experienced a 0.2% decline to 1.2776, falling from its earlier high since March 14th.

The Bank of England (BoE) is scheduled to hold a potentially pivotal policy meeting later this month, and traders are closely watching for signals regarding the start of its rate-cutting cycle.