On Wednesday, a strong dollar rally slowed down as traders were a little more cautious. They awaited a crucial U.S. consumer inflation report that was expected later in the day, keeping investors from making their big moves.
According to a Reuters report, the dollar steadied earlier in the Asian session after dropping overnight.
Earlier in the week, it had hit a two-year high. However, it soon backed away. This pullback was contributed to by a softer U.S. producer prices report, which eased Treasury yields from their peaks.
The euro hovered above its recent two-year low, while the pound fell 0.09% to $1.2205. Meanwhile, higher borrowing costs and worries about the UK’s fiscal health kept applying pressure on the Sterling.
Lesser hopes for Feds cutting interest rates this year
Investors are also watching the UK inflation data, which is due Wednesday. Economic weakness and rising domestic price pressures cast doubt on Chancellor Rachel Reeves.
Core consumer prices in the U.S. are anticipated to increase by 0.2% in December. This dims hopes that the Federal Reserve could cut interest rates faster this year.
It comes after last week’s strong jobs data, which showed the U.S. economy was resilient. Traders scaled back on expectations that the Fed would be easing further.
Analysts say the dollar impact of the inflation data will be temporary. Obviously, the market continues to look to the incoming Donald Trump term, including his tariff position.
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