Investing.com – The US dollar rose modestly on Wednesday, trading near two-month highs on expectations that the US Federal Reserve will cut interest rates modestly this year, while the pound weakened on positive inflation data. fell.
At 4:15 a.m. ET (8:15 p.m. Japan time), the dollar index against a basket of six other currencies was trading 0.1% higher at 103.180, close to Monday's two-month high.
Dollar supported by diminishing expectations for interest rate cuts
Recent data showing the economy's resilience, combined with slightly higher-than-expected inflation in September, led market participants to scale back bets on aggressive U.S. interest rate cuts.
Further fueling these expectations were comments from the Atlanta Fed president on Tuesday, when he updated his outlook for last month's U.S. central bank meeting, saying he had decided to cut interest rates by 25 basis points just one more time this year. Ta.
Most market participants believe there will be two more rate cuts of 50 bps this year, with traders currently predicting a 25 basis point rate cut when the Fed makes its next policy decision on November 7th. 92%, and the probability that there will be no change is 8%. Go to CME Group's (NASDAQ:) FedWatch tool.
Pound falls after inflation lifts
In Europe, the index fell 0.5% to 1.3003 after data showed Britain's inflation rate fell more than expected in September, paving the way for a rate cut next month. Ta.
In the UK, the annual rate fell to 1.7%, lower than expectations of 1.9% and last month's 2.2%.
It is the first time since April 2021 that wages have fallen below the Bank of England's 2% target, and adds to data earlier this week showing UK wage growth is at its slowest pace in more than two years.
“This statistic is clearly dovish for the Bank of England, paving the way for rate cuts at its two remaining meetings this year (November and December),” ING analysts said in a note.
“Markets may want to factor in the possibility of a 50bp rate cut in November, given Governor Andrew Bailey's comments earlier this month suggesting the BoE may accelerate the pace of easing.”
It traded 0.1% lower at 1.0882 ahead of Thursday's European Central Bank policy meeting.
China has already cut interest rates twice this year, and this week's 3.5% cut in deposit rates is almost fully priced in by financial markets.
“EUR/USD is primarily driven by external factors. The significant decline in oil prices has narrowed the scope for further declines based on market factors, but the pre-US election situation favors a weaker EUR/USD. “We continue to suspect that this is the case,” ING said.
Former Nurse's Weekly Losses
The yuan weakened this week, falling slightly to 7.1179 yuan, as sentiment towards the country's further stimulus measures worsened.
China's Ministry of Finance has announced that it will implement a number of fiscal measures to promote growth, but it has not disclosed the timing or scale of the planned measures, raising uncertainty about their effectiveness.
rose 0.2% to 149.43, approaching the 150 resistance level.
Economic data released later this week is expected to provide further clues about the Bank of Japan's plans for further rate hikes.
