Investing.com – The US dollar traded quietly on Wednesday ahead of the release of the minutes of the latest Federal Reserve meeting, while sterling rose as inflation fell less than expected in April.
At 04:55 ET (08:55 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading marginally higher at 104,600.
Dollar seeks direction ahead of Fed minutes
The dollar is struggling to move in any meaningful way as traders await the release of the latest Fed meeting, looking for more signals on the likely path of US yields towards the end of the year.
Last week’s softer-than-expected consumer inflation data raised hopes for rate cuts in a reasonably short time, but some Fed officials have continued to call for policy caution.
The Fed governor said Tuesday that recent economic data indicates the Fed’s restrictive policies are working as directed, while the Atlanta Fed chairman said the central bank must be cautious ahead of its first rate cut to lead to pent-up spending and to keep inflation ‘bouncing around’. “
“We should get some clarity on the FOMC’s thoughts in the May meeting minutes,” ING analysts said in a note. “While there should be evidence of growing concern about disinflation concerns, Powell’s messages seemed to indicate broad optimism about future price developments.”
Pound Sterling rises after UK inflation data
In Europe, inflation rose 0.2% to 1.2733 after UK inflation fell less than expected in April, making a cut by next month less likely.
rose 2.3% year-on-year, a sharp drop from a 3.2% increase in March and the lowest level since July 2021, when it was 2.0%, the Office for National Statistics said. But still above the 2.1% forecast.
“While this does not significantly change the BoE’s trajectory, it may prompt them to delay rate cuts for another month. Our base scenario remains a first interest rate cut in August,” ING said.
traded 0.1% lower to 1.0849 as traders prepared for the start of the rate cutting cycle next month.
“European Central Bank President Christine Lagarde sounded cautiously dovish, in line with most comments from her Governing Council members in a speech yesterday,” ING said, adding that markets are pricing in a 24 basis point easing next month .
“We still think the EUR/USD could ease back to 1.08 in the near term, but our Q3 forecast remains at 1.10 as the Fed moves to easing and the ECB broadly meets the expectations of the market,” ING added.
Kiwi rises on aggressive RBNZ
In Asia, the dollar rose 0.5% to 0.6118, with the New Zealand dollar rising sharply after the official spot rate was held steady as widely expected, but delays in any rate cuts were also noted due to persistent inflation.
fell 0.2% to 156.43, after Japanese soft trading data – which were disappointing and for April, as well as a bigger-than-expected one – weighed on the yen.
traded marginally higher at 7.2394 and remained within sight of a six-month high as traders waited for more signals on Beijing’s stimulus measures and the Chinese economy.
