The dollar’s rise slowed on Wednesday as traders turned cautious ahead of a U.S. consumer inflation report due later in the day, making them hesitant to take any further news. positions.
The greenback stabilized at the start of the Asian session after falling overnight and moving away from a more than two-year peak hit against a basket of currencies earlier in the week.
Its decline is partly due to weak producer prices in the United States, which pulled Treasury yields from their peaks. [US/]
Against the dollar, the euro edged closer to a more than two-year low and was last bought at $1.0301.
Sterling fell 0.09% to $1.2205, as it continues to come under pressure from rising borrowing costs domestically and concerns over Britain’s fiscal health. Brittany.
UK inflation data is also due later on Wednesday, and will be closely watched by investors as concerns over domestic price pressures and a weak economy put pressure growing on the Minister of Finance, Rachel Reeves.
In the United States, markets are forecasting a 0.2% increase in core consumer prices on a monthly basis for December, and any upside surprises could further limit the scope for interest rate cuts from the Federal Reserve this year.
Wednesday’s release follows last week’s jobs report, which highlighted the strength of the U.S. economy and led traders to sharply reduce bets on further easing by the Federal Reserve.
However, analysts believe that the impact of the inflation report on currencies is expected to be short-lived, as the market is mainly focused on President-elect Donald Trump’s imminent return to the White House and his plans in regarding customs duties in particular.
“Markets are still focused on the new administration’s policies and the impact on prices,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia.
“Even though FOMC officials appear more cautious about rate cuts, they are actually not that alarmed by the recent inflation numbers. They are actually more worried about the inflation outlook under a second Trump’s mandate.”
In the run-up to Mr. Trump’s inauguration on January 20, investors have been highly sensitive to headlines about his policy plans, which analysts say are expected to stoke inflation in the world’s largest economy.
The threat of tariffs and expectations of a Fed interest rate cut pushed Treasury yields higher and supported the greenback.
Against a basket of currencies, the dollar was slightly higher at 109.23, but some distance from Monday’s peak of 110.17, its highest level since November 2022.
The yen was little changed at 157.98 per dollar, after being supported by the prospect of a rate hike from the Bank of Japan next week.
Elsewhere, the Australian dollar retained some of its overnight gains and was trading at $0.6186. The New Zealand dollar fell 0.05% to $0.5601.
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