The U.S. dollar drifted higher against its major counterparts in pre-European trading on Tuesday, following the release of in-line personal income and spending data in July, which strengthened odds for an increase in the federal funds rate as soon as next month.

A report from the Commerce Department showed that income and spending rose in line with economist estimates in the month of July. The personal income climbed by 0.4 percent in July after rising by 0.3 percent in June. The increase in income matched economist estimates.

The personal spending rose by 0.3 percent in July following a 0.5 percent increase in June. The spending growth also met expectations.

Investors now focus on the all-important U.S. jobs report due at the end of the week for clarity on the likely timing of the next increase in the Fed funds rate.

It is believed that the nonfarm payroll report could have a significant impact on the interest rate outlook going into the next Federal Reserve meeting in September.

The greenback has been trading in a positive territory on Monday, buoyed by the Federal Reserve Chair Janet Yellen's remarks that an interest rate hike this year was still on the table.

The greenback rose 0.2 percent against the pound, 0.1 percent against the yen, 0.4 percent against the euro and 0.02 percent against the Swiss franc for the day.

The greenback appreciated to 0.9812 against the Swiss franc, its strongest since August 10. The greenback is likely to find resistance around the 1.00 mark. At yesterday's close, the pair was worth 0.9781.

The greenback, having fallen to a 4-day low of 101.75 against the yen at 8:00 pm ET, rebounded to 102.31. If the greenback-yen pair extends rise, 104.00 is possibly seen as its next resistance level.

Data from the Ministry of Internal Affairs and Communications showed that Japan's retail sales fell 0.2 percent on year in July.

That beat forecasts for a decline of 0.9 percent following the upwardly revised 1.3 percent contraction in June

Reversing from an early low of 1.1192 against the euro, the greenback edged up to 1.1164. The next possible resistance for the greenback may be located around the 1.10 region.

Data from Destatis showed that Germany's import prices continued to fall in July but the pace of decline slowed for the third straight month.

Import prices decreased 3.8 percent year-on-year in July, slower than the 4.6 percent decline seen in June and the expected fall of 4 percent.

The greenback advanced to 1.3064 against the pound, off its previous low of 1.3119. On the upside, the greenback may test resistance around the 1.28 area.

The greenback reversed from its early lows of 1.3009 against the loonie and 0.7580 against the aussie, edging up to 1.3040 and 0.7554, respectively. The greenback is poised to test resistance around 1.32 against the loonie and 0.74 against the aussie.

The greenback remained higher against the kiwi, trading at 0.7243, off its early 4-day low of 0.7265. Continuation of the greenback's uptrend may see it challenging resistance around the 0.71 mark.

Data from Statistics New Zealand showed that New Zealand's building permits tumbled a seasonally adjusted 10.5 percent on month in July, coming in at 2,811.

That follows the upwardly revised 21.9 percent spike in June.

Looking ahead, U.K. mortgage approvals for July and Eurozone economic confidence index for August are slated for release in the European session.

In the New York session, German flash CPI data for August, Canada industrial product and raw materials price indexes for July, U.S. S&P/Case-Shiller home price index for June and U.S. consumer confidence index for August are set to be published.

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