© Reuters.
Investing.com – The US dollar drifted lower in early European trading hours on Thursday, continuing to slide after weaker-than-expected US inflation raised expectations for an early end to the Federal Reserve’s monetary tightening.
At 03:55 ET (07:55 GMT), the greenback, which measures the greenback against a basket of six other currencies, was trading down 0.1% at 100.125, after falling nearly 1.2% on Wednesday, its biggest drop. Since November, to its lowest level. Level since April 2022.
Weak US CPI release hits the dollar
The dollar has been weak for a few weeks, but it had its worst session in five months on Wednesday after the US fell to 3% in June, down a full percentage point from last month, and came in at 0.2% in June against the market. The forecast is for 0.3%.
The outcome raised expectations that a 25 basis point rate hike at the meeting later this month would be the last, which could allow the US economy to “soft land”, boosting risk appetite at the dollar’s expense.
Analysts at Goldman Sachs said in a note that the result of the inflation report “is consistent with our view that the Fed’s tightening is in its final rounds.”
Sterling rose despite a contraction in GDP
It rose 0.2% to 1.3013, trading near a fresh 15-month high even though data showed the British economy contracted in May, raising the possibility of a recession later in the year.
The country fell 0.1% in May from April, after growing 0.2% the previous month, better than the expected 0.3% contraction.
However, despite these weak numbers, with the UK running the highest rate of any major economy, the tightening cycle is expected to continue when it next meets.
The European Central Bank publishes policy minutes for the month of June
It rose 0.2% to 1.1149, marking a new 15-month high, confirmed at 4.5% in June on a yearly basis, down from 5.1% in the previous month.
The ECB publishes its June policy-setting meeting later in the session, but its officials have been crystal clear that another rate hike is coming this month, so the meeting’s account is unlikely to have much impact.
Elsewhere, it fell 0.1% to 138.31, with the yen trading near a two-month high against the dollar, and the risk-sensitive index rose 0.6% to 0.6830, while trading largely unchanged at 7.1659, with the yuan weighed down by disappointing data. .