Investing.com – The U.S. dollar stabilized in early European trade Tuesday, just off a five-week high helped by its safe haven status as the standoff in Washington over the U.S. debt ceiling continued.
At 03:15 ET (07:15 GMT), the , which tracks the greenback against a basket of six other currencies, traded largely flat at 102.250.
The potential for a U.S. default of its debts if a deal is not done to lift the country’s borrowing limit, which Treasury Secretary Janet Yellen reiterated could be hit as soon as June 1, has helped the dollar push higher of late, with traders seeking the greenback given it is often used as a safe haven in times of stress.
The main parties are expected to meet once more later Tuesday, with President Joe Biden expressing confidence a deal can be done, but Republican House of Representatives Speaker Kevin McCarthy said on Monday that the two sides were still far apart.
“Unless we see truly encouraging progress, investors’ fears may keep growing,” said analysts at ING, in a note. “Barring positive news on this end, we think the balance of risks remains tilted to the upside for the dollar for now, which should see safe-haven flows as risk sentiment stays subdued.”
Aside from this, traders are likely to focus on the release of U.S. data for April, which is expected to show sales grew 0.8% on the month in April, an improvement from the dramatic slump of 0.6% last month.
The raised interest rates last week for a 10th straight time, but hinted that it may be about to pause its aggressive policy tightening as it studies incoming economic data and assesses the impact of the tightening to date.
Inflation remained elevated in April, even if slightly lower than the prior month, and a number of Fed officials have said in separate addresses that interest rates were likely to stay higher for longer if prices continue to remain substantially above the Fed’s 2% target.
Elsewhere, rose 0.1% to 1.0880, after bouncing off a five-week low overnight, ahead of the release of preliminary first quarter for the euro zone.
This is expected to show the region barely scraped growth in the first three months of the year, rising 0.1% on the quarter and 1.3% on an annual basis.
Also of interest will be the for May, which is expected to show a deterioration of sentiment in the eurozone’s largest economy.
fell 0.3% to 1.2494 after the U.K. unexpectedly rose to 3.9% in the three months to March, raising the likelihood of the Bank of England pausing its run of increases when it next meets in June.
dropped 0.3% to 135.78, fell 0.3% to 0.6683, while rose 0.2% to 6.9643 with the yuan trading near a two-month low after Chinese data showed and grew less than expected in April.
rose 0.1% to 19.6861 as Turkey’s presidential race heads to a runoff with incumbent Tayyip Erdogan leading his opposition rival.
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