Dollar attempts rebound after inflation-induced losses; sterling weakens
Investing.com — The U.S. dollar edged higher in early European trade Wednesday, attempting a rebound after the previous session’s sharp losses as cooling U.S. inflation raised expectations that the Federal Reserve has reached the end of its monetary tightening cycle.
At 03:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 104.057, not far from Tuesday's two-month low of 103.98.
The dollar was hit hard on Tuesday after data showed that U.S. consumer prices were unchanged in October, while the annual figure climbed 3.2% — below expectations — after rising 3.7% in September.
Sticky inflation has been a key point of contention for the Fed in maintaining its hawkish stance, especially after inflation rose more than expected in August and September.
In fact, Fed officials were keen to maintain a hawkish stance ahead of this release, resulting in the downside surprise having a significant impact on the dollar as traders priced out any chance of another hike this year, turning their attention to when the Fed might start cutting rates.
“We still think that the decisive blow to 'de-throne' the dollar will have to be given by a turn lower in activity data, which can make markets feel comfortable with pricing in more rate cuts,” said analysts at ING, in a note. “So, we will be looking with some interest at retail sales figures.”
Data on U.S. retail sales for October are due out later in the session, and analysts expect a drop of 0.3% from the month before, when retail sales rose 0.7%.
In Europe, GBP/USD fell 0.2% to 1.2475, dropping from levels last seen in September, after British inflation cooled by more than expected in October, offering some relief to the
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