The U.S. dollar turned weak on Tuesday after staying a bit firm in the Asian session, as data showing a drop in the pace of labor costs helped raise expectations the Federal Reserve will soften its aggressive approach and slow the pace of interest rate hikes.
The Fed is widely expected to raise interest rate by 25 basis points tomorrow. The focus will be on the accompanying statement and comments from Fed chief Jerome Powell for clarity about future rate hikes.
The Bank of England and the European Central Bank are expected to raise interest rates by 50 basis points this week.
Data from the Labor Department showed employment cost index wages in the U.S. increased by 1% on quarter in the fourth quarter of 2022, after rising 1.3% in the previous quarter.
The S&P/Case-Shiller Home Price Index in the United States decreased 0.8% month-over-month in November of 2022, the same as in October and marking a fifth consecutive decline.
A report from the Institute for Supply Management (ISM) said the Chicago PMI in the United States fell back to 44.3 points in January of 2023 from 44.9 in December and compared to market forecasts of 45. The reading pointed to a fifth consecutive month of contraction in business activity in the Chicago region.
Meanwhile, the Conference Board's consumer confidence index came in with a score of 107.1 in January, after coming in at a revised 109.0 a month earlier.
The dollar index, which climbed to 102.61 in the Asian session, slid to 102.01 around mid afternoon, and was last seen at 102.10, down 0.17% from the previous close.
Against the Euro, the dollar eased to 1.0866 after firming to 1.0805.
The dollar firmed to 1.2317 against Pound Sterling, gaining from around 1.2350.
Against the Japanese currency, the dollar weakened to 130.11 yen.