Dollar rises ahead of U.S. inflation data and ECB meeting
The American currency clung to marginal gains in early European trade Wednesday. However, volatility was limited. Remarkably, traders are awaiting upcoming U.S. inflation data and an ECB meeting for indications about future central bank policy.
The U.S. Dollar Index, which measures the dollar against a basket of six other currencies, increased by nearly 0.1% and traded at 90.093.
The euro against the dollar traded 0.1% higher at 1.2178. Meanwhile, the dollar against the Japanese yen traded at 109.47. The British pound traded a touch higher at 1.4158, while the risk-sensitive Australian dollar was slightly lower at 0.7739.
The greenback has been on a downtrend for much of the last year. Still, investors are starting to get nervous that rampant inflation could force the Federal Reserve to taper back its ultra-easy monetary policies earlier than expected. Remarkably, this would result in soaring interest rates and a more buoyant dollar.
Earlier Wednesday, China’s factory-gate prices increased in May to their highest level since 2008. It was driven by rising commodity prices, growing 9.0% year-on-year in May.
Consumer prices surged 1.3% year-on-year in May
Consumer prices also boosted for the third consecutive month, surging 1.3% year-on-year in May, up from 0.9% gains during the previous month. The Chinese yuan rose as a result. The dollar against the Chinese currency declined by 0.1% to 6.3953.
Remarkably, it sets the scene for Thursday’s release of U.S. consumer price data before the next Fed meeting on June 15-16.
Additionally, traders are waiting for the latest policy decision by the European Central Bank. The central bank widely anticipated to keep in place its ultra-loose monetary policies.
Moreover, the euro is expected to be sensitive to changes in the bank’s economic forecasts or any signal that the pace of bond buying could be reduced in months ahead.
Remarkably, the Bank of Canada meets later Wednesday with its latest policy decision.
No major change is anticipated later Wednesday. However, the dollar against the Canadian dollar has declined by 0.1% to 1.2106 as the Canadian economy moves toward a full recovery.
