Key Inflation Data and Wage Growth Affecting Dollar and Sterling
U.S. Dollar and Sterling in Early European Trade
The U.S. dollar remained stable in early European trade on Tuesday, with traders eagerly awaiting the latest inflation data that could impact U.S. monetary policy. Meanwhile, sterling saw gains due to healthy wage increases for U.K. workers.
U.S. Dollar Index and Inflation Data
The Dollar Index, tracking the greenback against a basket of other currencies, traded flat at 105.516 at 03:10 ET (08:10 GMT). The upcoming release of the October U.S. Consumer Price Index (CPI) is expected to influence trading sentiment ahead of the December Federal Reserve meeting, with analysts predicting a rise in the top-line number by 3.3% from the previous year.
Impact on U.S. Monetary Policy
Several Fed officials have cautioned about the possibility of further rate hikes if inflation persists, and any indications of stubborn inflation could lead to more bets on rate hikes by the central bank, favoring the dollar.
Strong U.K. Wage Growth
Sterling rose to 1.2296 after data revealed that British wages grew slightly less in the three months to September but remained close to their record pace. Despite a small drop from the prior month, wages were 7.7% higher than a year earlier, signaling a healthy U.K. labor market despite elevated inflation levels.
Eurozone Growth and ECB Rate-Hiking Cycle
The euro rose to 1.0707 ahead of the release of the latest quarterly eurozone growth numbers, which are expected to illustrate the impact of the European Central Bank’s prolonged rate-hiking cycle. ECB President Christine Lagarde recently stated that rates will remain restrictive for several quarters due to elevated inflation.
Yen’s Decline and Chinese Yuan’s Weakness
The Japanese yen edged lower to 151.64, nearing its weakest level in a year against the greenback, while the Chinese yuan remained weak after data showed a further slowdown in growth in the country through October.
