Dollar sellers hit pause for US inflation data

Traders paused their dollar selling as they awaited key US inflation data on Tuesday, allowing the currency to stabilize following a turbulent few days. The Australian and New Zealand dollars gained ground, both rising nearly 1% through Monday and remaining steady in early Tuesday trading. The euro also rebounded, jumping 0.7% overnight, reversing a recent decline driven by stronger-than-expected US jobs figures and expectations of higher interest rates.

The dollar index gained this year as early predictions for US rate cuts shifted to bets on hikes following the Israel-Hamas conflict, which boosted energy prices and fuelled inflation concerns. While some analysts see a 85% chance of a Federal Reserve rate increase next month, they caution that any significant inflation numbers above forecasts could further boost dollar expectations and lift the currency.