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·         The dollar fell on Tuesday in thin pre-holiday trading, as investors consolidated recent gains and focused less on trade tensions, raising the market’s risk appetite and prompting some flows into other currencies such as the euro and Australian dollar.

Ahead of the U.S. Independence Day holiday on Wednesday, market sentiment also improved after the Chinese central bank moved to calm currency markets following a fall in the renminbi below a key psychological level.

In afternoon trading, the dollar was down 0.4 percent against a basket of .DXY at 94.604, after notching up three consecutive months of gains. Investors are awaiting the release of the Federal Reserve’s June meeting minutes on Thursday and Friday’s U.S. jobs data for validation of policymakers’ forecasts for two more rate hikes this year.

Valuations also remain supportive of the dollar, with its trade-weighted basket still below long-term averages.

The euro, meanwhile, rose after Germany's coalition settled a row over migration that had threatened to topple Chancellor Angela Merkel's government. The single currency was last up 0.2 percent at $1.1655 EUR=.

·         The European Central Bank’s chief economist said on Tuesday he was confident inflation in the euro zone would continue accelerating toward the ECB’s target of just under 2 percent even after the end of its massive bond purchases.

Euro zone inflation came in at 2 percent in June, according to preliminary Eurostat estimates. The ECB expects it to average 1.7 percent this year and in the following two.

·         China is putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month but is facing resistance, European officials said.

In meetings in Brussels, Berlin and Beijing, senior Chinese officials, including Vice Premier Liu He and the Chinese government’s top diplomat, State Councillor Wang Yi, have proposed an alliance between the two economic powers and offered to open more of the Chinese market in a gesture of goodwill.

But the European Union, the world’s largest trading bloc, has rejected the idea of allying with Beijing against Washington, five EU officials and diplomats told Reuters, ahead of a Sino-European summit in Beijing on July 16-17.

·         China’s embassy in Washington has issued a security advisory to Chinese nationals traveling to the United States, the latest such warning as trade tensions escalate between the two countries.

The embassy warned Chinese tourists to be aware of issues including expensive medical bills, the threats of public shootings and robberies, searches and seizures by customs agents, telecommunications fraud and natural disasters.

·         The Trump administration on Tuesday rescinded an extensive set of guidelines put in place under President Barack Obama that had called on colleges and universities to consider race as a way of promoting diversity.

·         Top U.S. automakers reported stronger June sales, as consumers continued to snap up sport utility vehicles and trucks in larger numbers, parking for now worries about rising fuel prices, higher interest rates and trade tensions.

·         Crude prices ended slightly higher on Tuesday after a volatile session in which the U.S. benchmark passed $75 a barrel for the first time in more than three years before turning negative and later recouping its losses.

Oil rallied early in the session on supply concerns, then slid as traders booked profits ahead of the July Fourth holiday in the United States, and bet that global supply shortages would not persist as long as expected. Crude pared its losses late in the session, turning positive on market sentiment that supply disruptions would not resolve faster than previously expected.

U.S. light crude CLc1 settled up 20 cents at $74.14 a barrel, rebounding from a session low of $72.73 a barrel. In early trade, the contract rose to $75.27, a 3-1/2-year high.

Brent crude LCOc1 was up 46 cents at $77.76 a barrel, after trading as low as $76.67 and as high as $78.85.

Reference: Reuters