The dollar edged higher Tuesday, ahead of the release of key retail sales data, while the Chinese yuan benefited from the largely friendly dialogue between the U.S. and Chinese presidents during a virtual meeting.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 95.468, near a new 16-month high.
USD/CNY fell 0.1% to 6.3777, just above the five-month low reached earlier in the session, after a virtual meeting between U.S. President Joe Biden and his Chinese counterpart Xi Jinping proceeded relatively smoothly, albeit without any dramatically positive news.
The leaders of the two largest economies in the world agreed that their countries must increase communication and cooperation, a positive tone that has left the foreign exchange markets looking at the possibility of a reduction in trade tariffs in the near future.
British employers added a net 160,000 workers to their payrolls in October, indicating that the economy had negotiated the end of the government's job-protecting furlough scheme successfully.
The Bank of England decided against raising interest rates at its last meeting, wanting to see how the broader economy held up after the end of its employment support package, but these numbers should help the central bank focus on fighting inflation.
Sticking with economic data, U.S. retail sales data for October are due later in the session. These will be watched closely to see consumer demand remains strong even in the face of high inflation levels, and thus potentially putting more pressure on the Federal Reserve to act against the rising prices.
Elsewhere, EUR/USD gained 0.1% to 1.1375, bouncing a touch after earlier falling to a 16-month low, hit by the European region being hit once more by a fresh wave of Covid-19 cases.
The likes of Austria and the Netherlands have already put in place partial lockdowns, and a number of other countries are considering such moves in the runup to Christmas and the winter season.
European Central Bank President Christine Lagarde was insistent at her testimony in the European Parliament on Monday that the central bank wouldn’t be hurried into interest rate hikes, and this dovish stance is also weighing on the single currency.