Investing.com – The US dollar retreated on Wednesday, strengthening against its major peers ahead of the release of a key US inflation data later in the session.
At 04:45 ET (09:45 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.4% at 106.500, further back from last week’s two-year peak. did business
Dollar strengthens ahead of PCE data
Foreign currency traders look to cash in dollar gains ahead of the release of the October price index, due later in the session, before US markets close for the Thanksgiving holiday on Thursday.
The safe-haven U.S. currency was supported by President-elect Donald Trump’s threat to impose tariffs on Canada, Mexico and China, reviving fears of a global trade war, with serious implications for global economic growth. was done
The measures are widely seen as potentially inflationary for the US economy, which could prevent the Federal Reserve from cutting interest rates significantly.
“The highlight of today’s session will be the release of the US October core PCE deflator, which is expected to come in at 0.3% MoM,” analysts at ING said in a note.
“While the market has largely moved on from the US inflation story, a sticky reading will raise doubts that the Fed will need to cut at the latest in December. The dollar is largely expected to hold on to recent gains. Expect, however, selling at the end of the month remains a risk.
The euro was pressured by the weak economic outlook
In Europe, the dollar rose 0.3% to 1.0514, helped by the weakness of the session, but the single currency remains under pressure due to the weak European economic outlook.
Data released earlier on Wednesday showed France’s index fell in November, hit by rising household fears about unemployment.
The monthly business survey published by INSEE showed the sentiment indicator fell to 90 from a revised reading of 93 in October.
The European Central Bank has already cut rates three times this year, and is widely expected to cut again in December.
It traded up 0.3% to 1.2607, pushing further away from last week’s six-week low.
“With one-week deposit rates at 4.75% and the highest in the G10 space, sterling could gain some flow as the market makes up its mind about the pace and magnitude of Trump’s policy agenda,” ING said.
“Furthermore, the Bank of England rate profile continues to trade closer to the Fed than the ECB and suggests that sterling should outperform against the euro.”
Profit on yen safe-haven bets
The Japanese yen fell 1% to 151.58, helped by safe-haven bids, as well as increased bets for a December rate hike in Japan.
It slipped slightly to 7.2505, but still held near a four-month high amid concerns that Trump’s potential tariffs would hurt the already weak Chinese economy.
It rose 0.9% to 0.5889, after the country’s central bank cut interest rates by 50 basis points and signaled further easing early next year, citing pressure from domestic economic activity and falling inflation. -Recovered from the lows of the month.
