HG MARKETS:

The U.S. dollar advanced modestly on Tuesday, recovering from the previous session’s decline as investors sought clarity from political and economic signals. The Dollar Index, which measures the greenback against six major currencies, rose 0.2% to 106.42 after a 0.4% drop on Monday. Last week, the index climbed 1.6%, marking gains in six of the past seven weeks and reaching a one-year high.

Foreign exchange markets are currently consolidating after a period of significant volatility. The Dollar Index’s nearly 7% increase over six weeks represents one of the sharpest adjustments since mid-2022, reflecting a strong rebalancing in market dynamics.

The euro weakened against the dollar, with EUR/USD declining 0.6% to 1.0535, approaching last week’s one-month low. This movement follows concerns from European Central Bank (ECB) officials regarding the potential economic damage from proposed U.S. trade tariffs on the Eurozone. Meanwhile, data confirmed that Eurozone inflation met the ECB’s 2.0% target for October, while quarterly growth slowed to 0.4%, underscoring the region’s subdued economic momentum.

The British pound fell 0.4% to 1.2626 ahead of the release of October inflation data on Wednesday. Analysts anticipate the annual inflation rate to rise to 2.2%, up from 1.7% in September, marking a rare dip below the Bank of England’s (BoE) 2% target for the first time in over three years. Attention also turned to BoE Governor Andrew Bailey’s testimony before lawmakers on Tuesday, where he is expected to address the inflationary implications of the Labor government’s recently unveiled budget.

USD/JPY dropped 0.6% to 153.78 as the yen rebounded from near four-month lows recorded earlier in November. Market participants are focused on Japanese consumer inflation data due Friday, which could provide further clarity on the Bank of Japan’s monetary policy stance. This follows weaker-than-expected third-quarter GDP figures, which raised questions about the central bank’s ability to pursue further rate hikes.

Global currency markets remain influenced by a mix of economic data, central bank policy decisions, and geopolitical developments. As traders assess these evolving factors, volatility and strategic repositioning are likely to remain key themes in the near term.