The dollar stabilised before the Fed minutes, and the pound edged up on a jump in inflation.
Before the minutes from the last Federal Reserve meeting were released, the U.S. dollar stabilised in early European trading on Wednesday.At the same time, sterling inched up after the most recent rise in inflation.
At 3:05 (07:05 GMT), the Dollar Index, which compares the U.S. dollar to a group of six other currencies, inched up to 106.430 after being mostly the same on Tuesday.
Last week, when U.S. inflation numbers were lower than expected, traders cut their bets on a sharp interest rate hike in September. This made the dollar weaker. But the index has made up most of the ground it lost since a number of Fed policymakers warned of higher interest rates this year. This is because inflation is still near its highest level in 40 years.
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Still, the markets are wary of any more hawkish comments in the minutes, which are due at 14:00 ET (18:00 GMT). Traders are waiting to see if the Fed signals that interest rates will go up by 75 basis points in September, the same amount as in July.
At 08:30 ET (12:30 GMT), the U.S. retail sales report for July will be released. It is expected to show a 0.1% month-over-month increase, which is less than the 1% increase seen in June. This is because consumers are cutting back on spending because inflation is still at a 40-year high.
NZD/USD fell 0.1% to 0.6339 after the Reserve Bank of New Zealand raised rates by 50 basis points as expected and said that future rate hikes should happen sooner rather than later.
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AUD/USD fell 0.4% to 0.6995 after Australian wages rose 2.6% annually last quarter, which was much less than the headline inflation rate of 6.1%. This backed up the central bank’s decision to give itself more control over interest rates.
Back in Europe, GBP/USD went up 0.1% to 1.2104 after U.K. consumer prices went up 0.6% from June to make them 10.1% higher than a year ago. This is the highest inflation rate since early 1982.
The EUR/USD fell 0.1% to 1.0163 before the final reading of Eurozone GDP for the second quarter was released later in the session. The preliminary data showed faster growth than expected before the expected slowdown as the year goes on.
In a note, analysts at Nordea said, “The outlook for the Euro-area economy has quickly become worse, and the economy seems to be heading toward a recession.”
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But “even though the outlook is getting worse, the ECB will have to prove that it is good at fighting inflation and keep raising rates.”
