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Investing.com – The US dollar fell in early European trade on Wednesday, but gains were limited ahead of the expected US inflation report for April.
At 03:20 ET (07:20 GMT), the US dollar was trading down against a basket of six other currencies, down 0.1%, at 101.345.
Currency markets are trading in something of a holding pattern as traders await the release of the latest US data, due later in the session, for clues about future interest rate movements.
The US central bank issued its 10th consecutive rate hike last week, but Chairman Jerome Powell also indicated that it may pause its tightening campaign in June if incoming economic data allows.
Economists expect widely watched prices, which exclude volatile food and fuel prices, to rise 5.5% year-over-year, down slightly from a 5.6% increase in the previous month, and 0.4%.
“This will be a somewhat crucial week for markets to improve the Fed’s interest rate outlook after Chairman Jerome Powell appeared to trade an outright openness to pause with some backtracking against rate cut speculation last week,” analysts at ING said, in a note.
Traders will also be following the discussions surrounding the US debt ceiling as a meeting of senior lawmakers on Tuesday failed to break a potential deadlock over raising the US debt limit of $31.4 trillion just weeks before the US was forced into an unprecedented default.
Elsewhere, it rose 0.2% to 1.0976, staying near its highest level in more than a year after German consumer prices were confirmed in April, up from the year.
The European Central Bank (ECB) Governing Council member said on Tuesday that the bank will continue to raise borrowing costs until core inflation sees a sustained decline, adding that market expectations of a rate cut were misplaced.
It rose 0.1% to 1.2627, holding on to strength ahead of the central bank’s monetary policy meeting on Thursday, with interest rates expected to be raised another 25 basis points to 4.5% as it tackles the highest inflation rate of any large developed economy.
ING added, “We do not expect to see significant volatility in the pound around the issuance, and we see GBP/USD stabilizing at levels above 1.25 following the BoE meeting.”
It rose 0.1% to 135.38, extending losses for the fourth consecutive session while maintaining its pessimistic monetary policy in the near future.
It rose by 0.1% to 0.6769, continuing its positive run after a sudden hike in interest rates earlier this month, while it rose by 0.1% to 6.9280, approaching the seventh level that was widely watched with questions about the sustainability of the economic recovery after COVID increases.
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