Investing.com – The and fell slightly in European trading on Wednesday, after hitting a four-month high in the previous session.
Traders had previously invested in the greenback betting that Trump would introduce more expansionary policies, which could support inflation in coming years.
However, that trading took a break on Wednesday, with attention turning to key Consumer Price Index data to be released later in the day. The index is expected to show that inflation remained stable in October.
The October consumer price index reading also comes after Minneapolis Fed Chief Neel Kashkari warned Tuesday that any increase in inflation could cause the Fed to hold rates on hold.
His comments prompted traders to reduce bets on a 25 basis point cut in December, with traders estimating a 64.2% chance of a cut, down from 66.7% yesterday, according to CME Fedwatch.
“The strong dollar is currently undercutting much of Trump's policy, and the Fed's data releases/comments could provide good opportunities to take profits in bullish dollar positions,” ING analysts said ( AS:), in a note.
Meanwhile, in a note to clients on Wednesday, Bank of America (NYSE:) Securities analysts led by Athanasios Vamvakidis said they expected Trump's plans to introduce tax cuts and While imposing strict taxes on imports from the United States might support the dollar in the short term, they were unsure of its longer-term prospects.
“[L]”The direction of fiscal policy under the new Trump administration in the United States remains an open question,” analysts said.
“Pre-election promises included both tax cuts and spending cuts. The market has assumed an inflationary impact, further easing of fiscal policy on the back of tax cuts, but could be surprised by a tightening of fiscal policy from spending cuts.”
