By Karen Brettell
NEW YORK (Reuters) -The euro hit a three-week low on Monday before recovering to trade little changed on the day, while the dollar was steady against a basket of currencies, as traders largely shrugged off new tariffs ahead of key U.S. inflation data on Tuesday.
U.S. President Donald Trump on Saturday threatened to impose a 30% tariff on imports from Mexico and the European Union starting on August 1, after weeks of negotiations with the major trading partners failed to reach a comprehensive trade deal.
But markets have become increasingly immune to tariff headlines since Trump in April first announced larger than expected trade levies, then delayed their implementation.
“It’s something that’s happened before and the shock value is gone,” Joseph Trevisani, senior analyst at FX Street, said. At the same time, “the negative predictions haven’t come to pass so I don’t think you’re going to get too much more emphasis for the markets out of tariffs.”
The European Union and South Korea said on Monday it was working on trade deals with Trump that would soften the blow of the levies.
Federal Reserve Chair Jerome Powell has said that he expects inflation to increase this summer as a result of tariffs, which is seen keeping the U.S. central bank on hold until later in the year.
Investors will be watching consumer price inflation data for June on Tuesday for any signs that price pressures are accelerating again.
Economists polled by Reuters expect headline inflation to increase to 2.7% on an annual basis, up from 2.4% the prior month. Core inflation is expected to rise to 3.0%, from 2.8%.
Fed funds futures traders are pricing in 50 basis points of interest rate cuts by year-end, with the first reduction expected in September.
Markets are also focused on the U.S. fiscal and debt outlook and whether Trump will replace Powell as he criticizes him for delaying interest rate cuts and for renovation costs at the Fed’s headquarters.
The euro was last up 0.03% on the day at $1.1691. The dollar index fell 0.02% to 97.87. Against the Japanese yen, the dollar weakened 0.03% to 147.35.
The Mexican peso weakened 0.58% versus the dollar at 18.762.
The British pound fell 0.18% to $1.3473.
Bitcoin surpassed $120,000 for the first time on Monday, marking a milestone for the world’s largest cryptocurrency as investors bet on long-sought policy wins for the industry this week.
It was last up 1.60% at $121,038 and earlier reached $123,153.
(Reporting by Karen Brettell; Additional reporting by Rae Wee and Lucy Raitano; Editing by Andrew Heavens)
