Investing.com – The US dollar fell slightly on Wednesday, following a six-month high, ahead of the release of key US inflation data that will provide more clues about the future path of interest rates.
At 05:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 105,850 after trading above 106 for the first time since early May .
The American CPI is in danger of becoming large
The dollar is benefiting from Donald Trump’s victory in last week’s US presidential election, with Republicans likely to gain full control of Congress, which would likely mean lower taxes and trade tariffs – a policy seen as inflationary.
Traders are now looking ahead to the release of October US data later in the session, a crucial gauge of inflation in the world’s largest economy.
Economists expect headline price growth to have accelerated to 2.6% on an annual basis last month, up from 2.4% in September, while the ‘core’ measure, which excludes more volatile items such as food and fuel, was at 3 .3% on an annual basis is estimated. on an annual basis and 0.3% on a monthly basis, in line with September.
Fed policymakers will likely keep a close eye on the numbers as they try to gauge the path for interest rates for the rest of this year and into 2025.
“The strong dollar is currently pricing in much of Trump’s policy mix, and data and dovish comments from the Fed could provide good opportunities to profit from bullish dollar positions,” ING analysts said in a note.
German elections in February
In Europe, trading was largely unchanged at 1.0627, near a one-year low, with the common currency hampered by political uncertainty in Germany as well as the potential for tariffs on Europe from the new Trump administration.
The bloc’s largest economy will hold early elections on February 23, following the collapse of Chancellor Olaf Scholz’s governing coalition last week.
“Not much additional risk premium is being added to the EUR/USD compared to what rates suggest, as markets double down on expectations that the ECB will cut rates even more than the Fed in anticipation of the rate impact on growth,” he said. ING.
rose to 1.2750, just above Tuesday’s three-month low of 1.2719, after the Bank of England cut rates last week for the second time this year.
“The main event on the British pound markets today is a speech from Catherine Mann of the Bank of England, the most hawkish member of the MPC,” ING said.
“Markets will be alert to any comments on the implications of the recent Budget for monetary policy and any color on the latest jobs and wages figures. Given her arch-hawkish attitude, we suspect that she could – at least – emphasize the inflationary aspect of the government’s spending stimulus and perhaps focus more on the stubborn wage figure rather than the September rise in unemployment. ”
The yuan is recovering from recent lows
fell 0.4% to 7.2064, after rising to a three-month high this week after Beijing’s latest round of fiscal measures largely failed to materialize, especially as China faces mounting economic pressure from the government Trump.
rose 0.2% to 154.87, reflecting uncertainty over Japan’s political and monetary policy prospects, amid bets that the gap between US and local yields will last longer under Trump.
