Investing.com — The U.S. dollar edged higher in early European trade Wednesday, while sterling slumped as rapidly cooling inflation lifted expectations of Bank of England rate cuts next year.
At 03:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 101.894, not far removed from its recent four-month low of 101.76.
The dollar has been on the backfoot since last week's policy-setting meeting of the U.S. Federal Reserve saw three rate cuts penciled in for 2024, although these losses have largely been contained as a series of Fed policymakers have attempted to rein in these dovish expectations.
This continued on Tuesday, with Raphael Bostic, president of the Atlanta Federal Reserve, saying there was no «urgency» now for cuts, while Richmond Fed President Thomas Barkin said whether the central bank can deliver on forecasts of rate cuts depends on how the economy performs.
U.S. economic data due on Wednesday centers around the housing market, in the form of November existing home sales.
However, the core Personal Consumption Expenditures price index, the Fed’s favorite measure of inflation, is due on Friday, and could show whether inflation has slowed enough for the Fed to begin easing policy next year.
In Europe, GBP/USD fell 0.5% to 1.2662 after U.K. inflation plunged in November, dropping to 3.9% from 4.6% in October — the lowest reading since September 2021.
The important core annual figure, which excludes volatile food and energy prices, also dropped by an unexpectedly large amount, falling to 5.1% from 5.7%.
The Bank of England kept its main interest rate unchanged at its meeting last week, but stated rates would remain high for «an extended
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