The US dollar weakened against the Japanese yen on Tuesday as traders grew more cautious due to increasing political uncertainty in Europe, which raised demand for assets perceived as safe havens. The greenback also declined against the euro and the British pound following the release of lackluster data in the United States.
Anticipation for the general election that will be held in the United Kingdom on June 8 lowered tradersâ appetite for risk ahead of the vote that is expected to have an impact on the Brexit negotiations with the European Union. The election, which was approved by 522 to 13 votes in the House of Commons after being called for by Prime Minister Theresa May, might result in a swifter departure from the euro area.
New reports of a snap general election in Italy as soon as September added to the marketâs anticipation today. Four of the main political parties in Italy are set to begin discussions on the introduction of a new electoral law, which could lead to a new election before the end of the year. September was suggested by former Prime Minister Matteo Renzi as a date for the election since Germany will hold its federal election within the same month.
Meanwhile, in the United States, the Federal Reserveâs preferred gauge of inflation edged lower in April, which might weaken the case for higher interest rates from the central bank. The Bureau of Economic Analysis said that the core personal consumption expenditure price index declined to an annualized rate of 1.5% last month from 1.6% in the previous month, which matched expectations.
On a monthly basis, the index rose to 0.2% in April following a decline by 0.1% in March, which beat estimates of a 0.1% gain, while personal spending increased to 0.4% from 0.3% to meet estimates. Personal spending accounts for more than 65% of economic activity in the United States and has a direct impact on economic growth and monetary policy moves.
A separate report by the Conference Board said that an index that tracks consumer confidence in the United States declined to 117.9 in May from 119.4 in April, which disappointed expectations. The decline marked the second in a row as consumers felt less optimistic about future outlook, however, confidence in current conditions continued to hold steady.
USD/JPY declined to 110.78 as of 16:55 GMT on Tuesday from 111.16 when trading began today. USD/JPY touched 110.67 at 15:55 GMT, the pairâs lowest level since May 18.
EUR/USD moved to 1.1174 from 1.1199 at 14:00 GMT, the pairâs strongest level since May 26. EUR/USD started the day at 1.1135. GBP/USD returned to 1.2843 after rising to 1.2882 at 14:10 GMT, which was also the strongest level since May 26. GBP/USD started trading today at 1.2816.
The Dollar Index, which tracks the performance of the US currency against its major peers, dropped to 97.37 as of 16:56 GMT today from 97.44 yesterday.
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