By Peter Nurse

Investing.com – The U.S. dollar stabilized at lower levels in early European trading Tuesday as traders factored in a potentially less hawkish Federal Reserve, while sterling benefited from the increased risk sentiment as Rishi Sunak prepares to become Britain’s new prime minister.

At 02:55 ET (06:55 GMT), the , which tracks the greenback against a basket of six other currencies, edged higher to 111.980, close to Friday’s low of 111.70, the weakest since Oct. 6.

The dollar retreated on Monday after the October release showed U.S. business activity contracting for a fourth straight month, an indication that the Fed’s aggressive monetary tightening was having a significant impact.

This played into the idea that the central bank policymakers were having second thoughts about the extent of future after November’s expected 75 basis point increase.

The Wall Street Journal reported late last week that the pace of further rate hikes after November’s lift will be less clear, citing sources familiar with the Fed’s thinking.