Investing.com – The US dollar was steady on Wednesday after a weak night ahead of the July consumer price index release, while sterling weakened after favorable inflation data.
At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, settled lower at 102.277 after falling 0.5% overnight.
Dollar Trailing Ahead of CPI Release
The US currency retreated on Tuesday after a softer-than-expected July month, leading traders to slightly shift their bets to a 50 basis point cut in September.
The PPI reading gave hope that an inflation rating, due later on Wednesday, is also expected to show that inflation remained favorable in July, giving the Federal Reserve more room to start cutting rates.
“We have been bearish on the dollar lately and generally bullish on stabilizing sentiment, and a favorable US CPI print could pave the way for more risk-on/dollar-off trading in our view in the main PCE publication of August 30. and employment figures on September 6,” ING analysts said in a note.
At the end of July, it kept the policy rate at the same level of 5.25%-5.50% for more than a year, but indicated that a rate cut could come as early as September if inflation cools further.
The pound sterling falls after the publication of the British inflation rate
In Europe, trading was 0.2% lower at 1.2837 after data showed Britain experienced a smaller-than-expected rise in stock prices in July, raising the likelihood of another Bank of England rate cut.
Annual consumer price inflation rose to 2.2% after two months, at the level of the Bank of England’s 2% target, but this was lower than the forecast of 2.3%.
The BoE cut rates from a 16-year high of 5.25% early this month, and financial markets now see a 44% chance of a quarter-point BoE rate cut in September, up from 36% before the figures were announced. issued.
rose 0.3% to 1.1019, rising to levels not seen this year, after the European Union harmonized annual rate rose to 2.7% in July, up from 2.5% in the period up to and including June.
They started cutting interest rates in June, and many expect policymakers to agree to another cut in September, although rising inflation would make this less likely.
“We see the rise of the EUR/USD to the upper half of the 1.09-1.10 range as the start of a longer-term upward trend,” ING said. “We aim for a move to 1.12 in the short term, thanks to a smaller interest rate spread and stabilizing risk sentiment.”
Kiwi dollar plummets after interest rate cut
In Asia, yields fell 1% to 0.6014 after the 25 basis point rate cut, with Governor Adrian Orr saying the bank had also considered a 50 basis point cut.
The RBNZ signaled progress towards its annual inflation target of 1% to 3%, and also noted market expectations that rates will fall by 100 basis points by mid-2025.
rose 0.2% to 147.15 and stabilized after strong near-term gains, although further yen strength was limited by improved risk appetite.
Second-quarter data from Japan is expected on Thursday and is likely to play a role in the Bank of Japan’s plans to cut rates.
fell 0.1% to 7.1470, with data due later this week.
