Dollar steadied Tuesday, consolidating after its payrolls-inspired losses, with traders weighing up the potential for more Federal Reserve rate cuts along with a slowing economy.

At 04:15 ET (08:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, gained 0.2% to 98.765, after falling to a one-week low earlier in the session.

Dollar steadies after payrolls hit

The greenback was hard hit after the disappointing July jobs report at the end of last week prompted traders to swiftly price in rate cuts next month.

Traders are now pricing in an over 90% chance of the Federal Reserve cutting rates in its next meeting in September, compared with 63% a week earlier, the CME FedWatch tool showed.

Goldman Sachs expects the Fed to deliver three consecutive 25 basis point cuts starting in September, with a 50 basis point move possible if the unemployment rate climbs further in the next report.

San Francisco Federal Reserve Bank President Mary Daly said on Monday that given mounting evidence the U.S. jobs market is softening and no signs of persistent tariff-driven inflation, the risks are now skewed to more than two Fed cuts this year.

In Europe, EUR/USD dropped 0.3% to 1.1544, with the single currency hurt by data showing France's services sector contracted at a faster pace in July, with political uncertainty and weak demand weighing heavily on business sentiment.

The HCOB France Services PMI fell to 48.5 in July from 49.6 in June, marking the quickest rate of decline since April. A reading below 50 indicates contraction.

Tuesday's main eurozone data release is June PPI, which is expected at 0.6% year-on-year, suggesting the European Central Bank should be more concerned about inflation undershooting its 2% target.

"EUR/USD looks quite comfortable near the 1.1550 level and, in the absence of market drivers, may hang around that level for a while. We imagine buyers would return in the 1.1500/1520 area should the U.S. data weigh on EUR/USD today," said ING.

GBP/USD fell 0.1% to 1.3277, trading in a tight range. 

Elsewhere, USD/JPY traded 0.1% higher to 147.25, following some positive services purchasing managers index data for July.

AUD/USD rose 0.1% to 0.6468, while USD/CNY gained 0.1% to 7.1856 despite China's services PMI data for July reading stronger than expected.

Source: Investing.com