Euro, sterling slide versus dollar ahead of U.S. inflation data
By Joice Alves
LONDON (Reuters) — Sterling and euro fell against a strengthening dollar ahead of a key U.S. inflation report due later on Wednesday, with traders cautious as markets raised bets for a European Central Bank rate hike on Thursday.
The dollar index, which tracks the currency against six peers including yen, euro and sterling, held firm, though moves were subdued, up 0.13% to 104.73, as traders awaited the U.S. consumer price index (CPI) reading for August. The release comes just a week before Federal Reserve officials gather to decide on interest rate policy.
The U.S. consumer price index likely increased by 0.6% last month, according to a Reuters survey of economists. That would be the largest gain since June 2022 and would follow two straight monthly advances of 0.2%.
The Federal Reserve is largely expected to keep rates on hold at next week's meeting, according to CME's FedWatch Tool. The Fed's next move in November remains more uncertain.
«Neither the ECB nor the BoE wants to be the first to declare victory on inflation. This responsibility will probably rest on the Fed's shoulders,» said Stephen Gallo, Global FX Strategist at BMO Capital Markets.
This is why Wednesday's U.S. CPI has the potential to be the dominant driver for euro/dollar, he added.
The euro fell 0.2% to $1.0731 as markets raised their bets on further ECB rate hikes despite recent data showing the decline in euro zone business activity accelerated faster than initially thought last month.
Money markets are now pricing in an almost 70% chance of a 25 basis point move this week.
A source told Reuters that the ECB expects inflation in the 20-nation euro zone to remain above 3% next year, bolstering the case for a 10th consecutive
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