Dollar edges higher; U.S. inflation is the week's main focus
Investing.com — The U.S. dollar edged higher in early European trade Tuesday, reversing some of the previous session’s sharp losses as traders revised their positions before data showing a potential rise in U.S. inflation.
At 03:10 ET (07:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 104.332, after falling 0.5% in the prior session, retreating from last week's six-month high of 105.15.
The focus of the foreign exchange market this week is squarely on U.S. consumer inflation data due on Wednesday, which is expected to set the tone for a Federal Reserve meeting next week.
The central bank is widely expected to keep rates on hold in September, but signs that inflation is proving sticky could prompt another hike before the end of the year.
“The FOMC has already entered the pre-meeting blackout period, but the latest indications clearly pointed to a pause in September. Can inflation change policymakers’ minds? It would probably need to be a materially stronger than expected print, but from an FX perspective, expect the bullish pass-through to the dollar to be felt anyway,” said analysts at ING, in a note.
GBP/USD traded largely flat at 1.2505, as traders digested the latest U.K. employment data.
The U.K. unemployment rate rose to 4.3% in the three months to July from 4.2% a month earlier, its highest since the three months to September 2021, with the labor market showing signs of cooling.
However, wages excluding bonuses were 7.8% higher than a year earlier in the three months to July — the joint-fastest rate since records began in 2001 — putting more pressure on the Bank of England to tighten monetary policy further.
BOE policymaker Catherine Mann
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