The dollar rose against the EUR on Tuesday, reversing the single currency's earlier gains, as investors grew more risk averse and sought safety in the dollar. By yesterday's close, the USD rose against the EUR, pushing the oft-traded currency pair to 1.2185. The dollar experienced similar behavior against the GBP and closed at 1.4295.
As the U.S economy stabilizes, currency traders have started to focus more on fundamentals such as economic growth and short-term interest rates. That shift, just getting underway, could take the shine off the soaring USD in the coming months. A stronger currency is important to the U.S. because it entices foreign investors to Treasury debt that finances the nation's record budget deficit. The downside is that it may restrain profit growth at companies with international sales by making U.S. exports more expensive.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the CPI at 12:30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the USD in the short-term. Traders are also advised to follow the FOMC Meeting Minutes at around 18:00 GMT. This meeting is very likely to Impact the Dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of the day's trading.