In early European trading on Wednesday, the U.S. dollar went up a little bit, helped by higher yields on U.S. Treasury bonds, as attention once again turned to rising inflation around the world.
At 2:55 AM ET (06:55 GMT), the Dollar Index, which compares the U.S. dollar to a group of six other currencies, was up 0.2% to 101.995, continuing the rise from the previous session.
The index had dropped to a five-week low of 101.29 earlier in the week as people started to think that the Federal Reserve’s aggressive policy tightening was causing U.S. inflation to peak. This means that the U.S. central bank might stop raising interest rates after two more increases in June and July.
But attitudes have started to change again after data showed that consumer inflation in the Eurozone rose to a record high and oil prices rose to their highest levels since early March. This caused benchmark 10-year Treasury yields to rise overnight to 2.88 percent, the highest level since May 19.
Also, U.S. President Joe Biden met with Fed Chairman Jerome Powell, and Biden said that they would “focus like a laser on addressing inflation” before the midterm elections in November.
Later in the day, the Fed will start reducing its $8.9 trillion balance sheet and release its Beige Book. The president of the New York Fed, John Williams, and the president of the St. Louis Fed, James Bullard, will also speak at separate events.
In terms of economic data, the report on April job openings, called the JOLTS job report, is due at 10 a.m. ET (1400 GMT), a day before the official monthly employment report, which is widely watched, comes out on Friday.
Analysts at Nordea said in a note that both the JOLTS job opening report and the payroll report will be closely watched. “Wage growth won’t really slow down as long as there are twice as many jobs available as there are unemployed.” And service prices won’t go down if wages keep going up at the same rate. “
The EUR/USD fell 0.1 percent to 1.0718, retreating from a five-week high reached earlier in the week following the release of weak German retail sales. went down 0.1% to 1.2593, while the risk-sensitive AUD/USD went down slightly to 0.7172 and the NZD/USD went down 0.3% to 0.6493.
The USD/JPY rose 0.5 percent to 129.34, a two-week high, as US yields rose.USD/CNY increased by 0.3 percent to 6.6911.
Aside from that, USD/CAD went up by 0.2% to 1.2665 before the Bank of Canada’s rate-setting meeting later on Wednesday. Most people expected a half-point increase.
As the central bank tries to keep inflation in check, the accompanying statement is likely to sound like a hawkish defense of the big increase. It could also leave the door open to another half-point increase at the next meeting in July.
