The US dollar edged marginally higher Tuesday, trading near one-week lows ahead of a data deluge, while the British pound slipped 0.1% to 1.3683, weakening as Prime Minister Keir Starmer faces political turmoil. Starmer battles for his position amid controversy over the appointment of Peter Mandelson as ambassador to the United States, a move criticized due to Mandelson's ties to the late Jeffrey Epstein. Analysts warn that replacing Starmer or Chancellor Rachel Reeves could initially boost gilt yields and pound weakness, though longer-term fiscal policy shifts may have a more profound impact.

This political instability contrasts with the dollar's cautious advance, driven by uncertainty over future US interest rates following President Trump's nomination of Kevin Warsh as Fed chair, replacing Jerome Powell. Markets are poised for a flurry of data, including December figures and January payrolls, which could significantly influence the dollar's trajectory.