Investing.com – The US dollar rose on Wednesday ahead of an opportunity to assess US interest rate expectations, while the euro fell.
At 04:10 EDT (08:10 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, rose 0.1% to 102.387, not far from its highest level in seven weeks on Friday. At 102.69.
The dollar awaits the minutes of the Federal Reserve meeting
Demand for the dollar has been increasing since Friday’s strong report prompted the market to rule out the possibility of another 50 basis point rate cut in November, in favor of a traditional 25 basis point cut.
The CME FedWatch tool showed that investors now have about an 85% chance of a quarter-basis point cut in interest rates, as well as a small chance that the Fed will leave interest rates unchanged.
Attention now turns to the announcement of the Fed’s September meeting, which is scheduled to take place later in the session.
The central bank decided to cut interest rates by 50 basis points at this meeting, and the minutes of the meeting are likely to provide the rationale behind this decision. However, Fed policymakers have been active over the past few days, so it is controversial that the minutes can offer anything new.
The September report is due on Thursday, and is also likely to take into account the Fed’s forecasts.
The euro falls before the European Central Bank meeting
In Europe, it fell 0.2% to 1.0962, with the euro falling despite the release of better-than-expected German trade data in August, which raised hopes for a recovery in the euro zone’s largest economy.
Official data on Wednesday showed a 1.3% rise in August on a monthly basis, defying expectations for a 1.0% decline.
The bank meets next week and is expected to ease policy again after cutting interest rates twice this year as economic growth weakens while inflationary pressures ease.
“The cut is very likely and will not be the last, and its pace depends on how the battle against inflation develops,” Francois Villeroy de Galhau, a policymaker at the European Central Bank, said in an interview on Wednesday.
It fell 0.2% to 1.3081, not far from Monday’s three-week low of 1.3059.
“The British press is starting to reach a fever pitch with its speculation about what Chancellor Rachel Reeves will deliver in her first Budget on October 30,” analysts at ING said in a note. “Investors are still looking for any signs that the UK bond market is once again becoming nervous about potential spending plans.”
Kiwi declines after interest rate cuts
The New Zealand dollar fell 0.9% to 0.6085, with the New Zealand dollar falling to its lowest level since August 19 after cutting interest rates by 50 basis points and leaving the door open to more aggressive monetary easing.
The index rose 0.2% to 148.53 after touching a seven-week high of 149.10 on Monday.
The yen could see volatile trading in the next few weeks, given that Japan has elections scheduled for October 27, ahead of the Bank of Japan’s monetary policy meeting in October and the US presidential election next month.
The pair rose 0.1% to 7.0643, after the pair rose 0.6% in the previous session, as insider trading resumed after the Golden Week holiday.