Investing.com – The US dollar retreated from high levels on Wednesday, interrupting its recent rally ahead of the release of key macroeconomic data that could change expectations for future Fed rate cuts.
At 05:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% lower at 104.037, after hitting its highest since late July on Tuesday.
The dollar falls as labor data is in demand
The dollar has been rising lately as recent economic readings have pointed to a resilient economy, leading traders to scale back their views on the pace of Federal Reserve rate cuts.
The labor market in particular is in the spotlight, with data released on Tuesday showing it was lower than expected in September, falling to its lowest level since January 2021.
This weighed on the dollar overnight, as a slowing labor market could strengthen the case for the Federal Reserve to cut rates again in November.
The report will be released later Wednesday, before the weekly report on Thursday, and then the potentially crucial monthly report on Friday.
Preliminary third-quarter earnings release will also take place later in the session and is expected to show continued solid growth in the world’s largest economy.
The euro was helped by German GDP
In Europe, yields rose 0.3% to 1.0850, helped by stronger-than-expected German third-quarter growth figures.
The German economy grew unexpectedly by 0.2% in the third quarter compared to the previous three-month period, a significant improvement from the expected 0.1% quarter-on-quarter decline.
The German Chamber of Commerce and Industry predicted on Tuesday that the euro zone’s largest economy will shrink by 0.2% this year, lowering its previous forecast of stagnation published in May.
The ECB has cut rates three times this year and is expected to cut again at its next meeting.
fell to 1.3011, higher than the UK budget later in the session, the first for the new Labor government.
Finance Minister Rachel Reeves is expected to raise both taxes and spending, and there is some wariness two years after then Prime Minister Liz Truss’s tax cut plans sparked a bond market crisis.
Yen awaits BOJ meeting
fell 0.2% to 153.12, with the pair retreating after reaching near 154 in overnight trading.
The yen’s weakness came before the close of a meeting on Thursday where the central bank is widely expected to leave interest rates unchanged.
Increased political uncertainty in Japan is expected to cloud the BoJ’s plans to raise rates further after two rate hikes earlier this year.
fell 0.1% to 7.1241, with the focus this week on the country’s purchasing managers’ index data, which follows several new stimulus measures from Beijing rolled out through October.
China’s National People’s Congress will also take place in early November, which is expected to provide more clues about the government’s plan to increase budget spending.
