Investing.com – The US dollar rose on Wednesday ahead of an opportunity to assess the interest rate outlook for the United States, while the euro retreated.
At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 102.387, not far from Friday’s seven-week high on 102.69.
The dollar awaits Fed minutes
The dollar has been in demand since Friday’s strong report led the market to largely rule out the chance of another 50 basis point cut in November in favor of a more traditional 25 basis point cut.
Investors now have about an 85% chance that a quarter-basis-point cut is priced in, and a small chance that the Fed leaves rates unchanged, the CME FedWatch tool showed.
Attention now turns to the release of the Fed’s September meeting, which will take place later in the session.
The central bank decided to cut rates by as much as 50 basis points at this meeting, and the minutes will likely provide the rationale behind that decision. That said, Fed policymakers have taken strong action in recent days, so it’s questionable whether the minutes can offer anything new.
September interest rates are expected on Thursday and will likely also play a role in the Fed’s outlook.
The euro slips before the ECB meeting
In Europe, the currency fell 0.2% to 1.0962, with the euro weakening despite the release of better-than-expected German trade data in August, raising hopes of a recovery in the euro zone’s largest economy.
rose 1.3% month-on-month in August, official data showed on Wednesday, defying expectations of a 1.0% decline.
It meets next week and is expected to ease policy again after cutting interest rates twice this year as economic growth has weakened while inflationary pressures have eased.
“A cut is very likely and it will not be the last. The rhythm depends on how the fight against inflation develops,” ECB policymaker Francois Villeroy de Galhau said in an interview on Wednesday.
fell 0.2% to 1.3081, not far from Monday’s three-week low of 1.3059.
“The British press is reaching fever pitch with speculation about what Chancellor Rachel Reeves will present in her first budget on October 30,” ING analysts said in a note. “Investors continue to watch for signs that the UK government bond market is becoming nervous again about potential spending plans.”
Kiwi plummets after interest rate cut
fell 0.9% to 0.6085, with the Kiwi dollar falling to its lowest level since August 19 after the 50 basis point rate cut, opening the door for even more aggressive monetary easing.
rose 0.2% to 148.53, after hitting a seven-week high of 149.10 on Monday.
The yen could see volatile trading in the coming weeks as Japan has elections scheduled for October 27, ahead of the Bank of Japan’s monetary policy meeting in October and the US presidential election next month.
rose 0.1% to 7.0643 after the pair rose 0.6% in the previous session as onshore trading resumed after Golden Week.
