Investing.com – The U.S. dollar steadied on Wednesday after a one-day loss and sterling rose after U.K. inflation returned to the Bank of England’s target for the first time in nearly three years.
At 04:25 ET (0825 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading marginally higher at 104.885, having fallen to 104.762 in the previous session.
The dollar is stabilizing
The U.S. currency steadied on Wednesday after falling in the previous session and barely rose last month, signaling continued headwinds to consumer spending dynamics despite signs of easing inflation pressures.
“The data is consistent with our view that US consumer spending has peaked and should lead to a broader slowdown in the second half of the year,” ING analysts said in a note.
Last week, the Fed kept its benchmark interest rate in the range of 5.25%-5.50%, but the central bank also released updated economic forecasts that showed its officials lowering their expectations for rate cuts this year to one in three seen in March. .
However, markets are now pricing in a 67% chance the Fed will begin cutting rates in September, with nearly 50 basis points of rate cuts planned for the rest of the year, according to CME’s FedWatch tool.
Trading ranges are likely to be tight on Wednesday as US investors celebrate the June 16 holiday.
Pound sterling rises after inflation data
rose 0.2% to 1.2728 after data showed UK inflation returned to the Bank of England’s 2% target in May for the first time in almost three years.
The annual rate’s fall of 2.3% from April was in line with expectations and marked a sharp decline from a 41-year high of 11.1% reached in October 2022.
It holds its last political meeting on Thursday.
“The bank will not cut rates at tomorrow’s meeting. But we still have another report in July and, unless this is a significant surprise, we suspect it will still leave the Bank of England on track for a rate cut in August,” ING added.
fell 0.1% to 1.0735, with the euro remaining under pressure from political unrest in France and the wider bloc.
“EUR/USD continues to stabilize, but still appears to lack the energy to make a significant recovery, with ongoing political risks and financial challenges weighing on the single currency,” ING said.
Aussie benefits from aggressive RBA stance
In Asia, shares traded 0.1% lower at 157.77, with the Bank of Japan’s April policy minutes showing policymakers discussing the impact of a weak yen on prices.
However, the release had little impact on the market as investors looked forward to the Bank of Japan’s next meeting in July.
traded 0.1% higher at 7.2569 before rising 0.3% to 0.6672 following Governor Michelle Bullock’s aggressive stance at a news conference following the central bank’s rate decision.