Euro and sterling edge up versus dollar
Investors jittery over tariff threat, Fed policy
U.S. inflation report due on Wednesday
Fiscal worries keep pound in focus

Jan 14 Reuters The dollar hovered near its highest level in more than two years on Tuesday as traders scaled back bets on U.S. rate cuts in 2025 after strong economic data, while investor concerns about Britain39;s fiscal health kept frail sterling in the spotlight.

With Presidentelect Donald Trump set to step back into the White House next week, the focus has been on his policies which analysts expect will boost growth but add to price pressures.

The threat of tariffs along with the Federal Reserve39;s stated measured approach to rate cuts this year has lifted Treasury yields and the dollar, putting the euro, pound, yen and yuan under pressure.

However, on Tuesday the market focus returned to the chance that U.S. tariffs may be raised gradually, after a media report suggesting the U.S. could take a measured approach.

The nomination hearing of Scott Bessent for U.S. Treasury Secretary on Thursday will be interesting, especially if he makes any comments about the dollar and other currencies, potential tariffs, a shadow Fed, and the U.S. fiscal outlook etc, said Paul Mackel, global head of forex research at HSBC.

Bessent is expected to keep a leash on U.S. deficits and to use tariffs as a negotiating tool, mitigating the expected inflationary impact of the U.S. economic policy.

The euro was up 0.2 at…