Dollar Gains Slightly Ahead of Fed Minutes
The U.S. dollar saw a marginal increase in early European trade on Wednesday as traders awaited the release of the minutes from the latest Federal Reserve meeting for insights into the direction of U.S. interest rates.
The Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 104.102 at 04:05 ET (09:05 GMT).
Fed Minutes Could Influence Dollar Movement
The dollar had recently slipped back after expectations of early interest rate cuts by the Fed diminished, causing the greenback to climb to three-month highs. The upcoming direction of the currency could hinge on the insights from the January Federal Reserve meeting, set for release later on Wednesday.
Analysts at ING noted, “Recall this was seen as a pretty neutral meeting until Fed Chair Jerome Powell used an opportunity in the press conference to say that a March rate cut was unlikely.”
Traders are currently pricing in around 90 basis points worth of easing by the Fed this year, possibly starting in June. Additionally, a number of Fed officials are also scheduled to speak this week, including and later on Wednesday.
Eurozone Consumer Confidence Data Anticipated
The euro edged higher to 1.0807 in anticipation of the release of the latest figure for the eurozone. Expectations suggest a slight improvement in February from the previous month, though it is anticipated to remain relatively weak.
According to ING, “If there is a ray of light for the eurozone economy it may be that wage growth is not falling as quickly as inflation and that there may be a boost from rising real incomes after all.”
Meanwhile, traded marginally lower at 1.2616 after data showed that Britain recorded its highest ever in January as Chancellor Jeremy Hunt prepares his annual budget. The U.K. recorded a budget surplus of £16.7 billion in January due to record seasonal tax inflows, although the broader fiscal picture remains challenging.
Chinese Economic Recovery and Japanese Data
In Asia, edged lower to 7.1891, with data showing increased consumer spending and travel demand during the Lunar New Year holiday, lifting hopes for a bigger recovery in consumption, a key driver of the Chinese economy.
The People’s Bank of China also cut its five-year by a bigger-than-expected margin on Tuesday, pointing to more support for the Chinese economy. Additionally, rose 0.1% to 150.14, with the pair remaining above the widely-watched 150 level after data showed a bigger-than-expected increase in Japanese in January, while contracted more than expected.
Breaks above 150 have attracted government intervention in the past, with officials also offering verbal warnings on any such moves last week.
