The U.S. dollar was little in early U.S. trading on Tuesday, strengthening from a one-month low as traders digested former President Donald Trump's possible return to the White House as well as the likelihood that the Federal Reserve will begin cutting interest rates in September.
The US Dollar Index, which measures the US dollar against six major currencies, traded 0.2% higher at 104.101, after falling to its lowest level since mid-July earlier this week.
The US dollar strengthened after Donald Trump received a warm welcome on the first day of the Republican National Convention in Milwaukee, just days after surviving an assassination attempt in Pennsylvania on Saturday.
The four-day convention will culminate with Trump's inaugural address on Thursday, when he formally accepts the party's nomination to face President Joe Biden in their 2020 re-election clash.
The attack has raised expectations of a Trump victory in the November election, a scenario that could boost the US dollar, as he has signaled his intention to implement more trade policies.
"The stronger dollar appears to be driven by increased expectations on a Trump presidency following last weekend's events," analysts at ING said in a note. "If markets continue to add to their Trump bets, there is a higher chance of a widening initial position heading into November.
On Monday, Powell said US inflation readings for the second quarter "add some confidence" that the rate of inflation is returning to the Federal Reserve's target in a sustainable manner.**
Elsewhere EUR/USD slipped 0.1% to 1.0899, with the euro below a four-month high, ahead of the European Central Bank's policy meeting on Thursday.
The ECB is expected to keep rates on hold after lowering them in June, and attention will be focused on comments from chief Christine Lagarde in an accompanying press conference.
GBP/USD traded slightly lower at 1.2995, after last week hitting the highest level seen in over two years.
Political certainty following a landslide election victory for Britain's centre-left Labor government has helped sterling gain support, especially when compared to the turmoil in France and the US.
