Investing.com - The U.S. dollar edged higher in early European trade Tuesday, rebounding after steep overnight losses, while the euro slipped lower after weak German employment data. 

At 04:45 ET (08:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 104.165, after earlier dipping below 104 for the first time since April 9.

JOLTs data in spotlight

The dollar has stabilized Tuesday following sharp losses at the start of the week after data showed a second straight month of slowdown in manufacturing activity and an unexpected decline in construction spending.

Signs of economic weakness boosted the possibility of the Federal Reserve cutting interest rates later this year, with fed funds futures now putting the chances of a rate cut in September at around 59%, according to LSEG data, up from around 55% on Friday.

There is more important labor due later in the session, in the form of the JOLTs job openings for April, a keenly-watched precursor to Friday’s key monthly U.S. payroll figures.

“The dollar is starting to show signs of weakness,” said analysts at ING, in a note. “Today's U.S. JOLTS job openings data could determine whether recent dollar losses are just idle range-trading or the start of an important new trend. We certainly see downside risks to the dollar today.”

Euro slips after weak German employment data

In Europe, EUR/USD traded 0.1% lower to 1.0888, retreating after the pair climbed as 1.0916 earlier in the session for the first time since March 21.

The number of people out of work in Germany rose more than expected in May, data showed earlier Tuesday, growing 25,000 in seasonally adjusted terms, above the 10,000 expected.

"The spring recovery did not really get going this year," said labour office head Andrea Nahles. "Improvement is still a long time coming."

The European Central Bank has signaled an interest rate cut at its next meeting on Thursday, but a pick-up in inflation in data last week may give officials pause when considering when next to ease.

GBP/USD fell 0.2% to 1.2776, falling after earlier climbing to its highest level since March 14.

The Bank of England holds a potentially pivotal policy meeting later this month, and traders are watching for clues on when its rate-cutting cycle will start.

Japanese yen sees demand

In Asia, USD/JPY traded 0.5% lower to 155.34, with the yen continuing to gain against the dollar after falling overnight below 156 for the first time since May 21.

The Bank of Japan meets later this month, and traders will be looking for clues as to whether another hike is on the cards. 

USD/CNY traded 0.1% higher at 7.2439, staying close to recent six-month highs as sentiment towards China remained weak. 

USD/INR rose 0.5% to 83.494, with the Indian rupee retreating after early indications suggesting a narrow win for Prime Minister Narendra Modi in the closely-watched 2024 general election.

While a win still presents a rare third term for Modi, a smaller majority than he had hoped for suggests greater difficulty in instigating economic reforms.