US dollar steadies ahead of CPI as oil surge pressures global currencies

The US dollar remained supported on Tuesday after benefiting from a risk-averse market environment at the start of the week.

Investors also turned their attention to the upcoming US inflation data, while rising geopolitical tensions continued to lift oil prices and pressure several major currencies.

The US Dollar Index (DXY), which closed in positive territory on Monday, traded in a narrow range above the 101.00 mark during the European session on Tuesday.

Market participants are now awaiting the release of the US Consumer Price Index (CPI) data.

Annual CPI inflation is forecast to ease to 3.8% in June from 4.2% recorded in May.

Euro and sterling remain in focus ahead of Lagarde's speech and UK GDP data

The euro remained in consolidation after Monday's losses.

EUR/USD traded below the 1.1400 level after declining around 0.3% in the previous session.

Investors are also watching comments from European Central Bank President Christine Lagarde, who is scheduled to meet US Treasury Secretary Scott Bessent later in the day.

Lagarde is also expected to deliver a speech that could offer further clues on the economic outlook.

The British pound steadied against the US dollar after coming under pressure on Monday.

GBP/USD traded near the 1.3350 level during the European session.

Investors are now looking ahead to the UK's monthly Gross Domestic Product data for May, which will be released later this week by the Office for National Statistics.

Yen trades sideways after Monday's gains

The Japanese yen remained relatively stable after USD/JPY advanced about 0.5% on Monday.

The currency pair traded sideways above the 162.00 level during European trading hours.

Earlier on Tuesday, Japan's Finance Minister Satsuki Katayama said that a sharp shift in the asset management environment could prompt a review of the Government Pension Investment Fund's portfolio.

New Zealand dollar rises on policy easing comments

The New Zealand dollar outperformed several peers after comments from Reserve Bank of New Zealand Chief Economist Paul Conway.

Conway said on Tuesday that additional easing of monetary stimulus would probably be needed if inflation resulting from the Middle East conflict proves persistent.

Following the remarks, NZD/USD gained bullish momentum and traded near the 0.5800 level, rising roughly 0.8% on the day.

Indian rupee weakens as oil prices surge

The Indian rupee traded sharply lower against the US dollar on Tuesday as higher crude oil prices and rising US Treasury yields reduced demand for the local currency.

USD/INR climbed to a fresh seven-week high near 96.13.

The pressure on the rupee coincided with a sharp rise in domestic crude oil futures.

During the opening session, the MCX Crude Oil contract expiring on July 20 opened 4.24% higher at around Rs. 7,673, marking its highest level in nearly a month.

Currencies of economies that rely heavily on imported oil, such as India, typically come under pressure when crude prices rise, as higher import costs weigh on their external balances.

Middle East tensions drive oil prices higher

Geopolitical tensions remained a key driver of market sentiment.

The US military carried out strikes for a third consecutive day on Monday.

Iranian media reported explosions on the islands of Kish, Qeshm and Abu Musa, as well as in the port city of Bandar Abbas.

The escalating tensions continued to support crude oil prices.

West Texas Intermediate crude climbed nearly 9% on Monday and was last seen trading around $80 per barrel, extending gains by another 2.5% during Tuesday's session.