The U.S. dollar edged higher in early European trading Monday, holding on to last week’s strength at the start of a week that includes several central bank meetings, most notably the Federal Reserve, as well as a slew of important economic data releases.
As of 03:20 ET (08:40 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 106.445.
Federal Reserve to Meet This Week
The U.S. dollar has been on a tear lately, helped by signs of U.S. economic strength even after an extended period of interest rate hikes by the Federal Reserve.
U.S. consumer spending surged in September, while the U.S. economy grew in the third quarter at its fastest pace in nearly two years.
Fed policymakers meet this week, and the central bank is expected to keep interest rates on hold when it announces its decision on Wednesday,
However, traders are concerned that these strong numbers will mean that they signal higher rates for longer as they continue to worry about overheated inflation.
Yen gets reprieve ahead of BOJ meeting
The USD/JPY fell 0.1% to 149.50, with the yen getting a bit of a reprieve after rising to a one-year high of 150.78 last week.
The focus was on the conclusion of Tuesday’s BOJ meeting, where the central bank is expected to possibly announce further changes to its yield curve control policy as it grapples with high inflation and a severely weakened Yen.
Recent data showed a growing resurgence in Japanese consumer inflation, which may prompt the BOJ to hint at plans to taper its ultra-loose policy.
Euro Slips After German, Spanish Inflation Data
EUR/USD fell 0.1% to 1.0554, with the single currency retreating after data showed inflation in the euro zone fell, just days after the European Central Bank ended the longest streak of interest rate hikes in its 25-year history last week, leaving its benchmark rate at 4%.
Data released early Monday showed that consumer prices in North Rhine-Westphalia, Germany’s most populous state, rose 3.1% on an annual basis in October, down from 4.2% the previous month.
In addition, Spanish CPI rose 0.3% on the month in October, below expectations for a 0.6% increase, and climbed 3.5% on the year, below expectations for a 3.8% increase.
BOE seen on hold
The GBP/USD fell 0.2% to 1.2094 as the Bank of England also holds a policy meeting later in the week.
The central bank is widely expected to keep interest rates on hold, despite growing concerns about a recession, as inflation in the country hit 6.7% in September, the highest among the world’s major economies.
Elsewhere, AUD/USD rose 0.3% to 0.6352, NZD/USD gained 0.1% to 0.5820, and USD/CNY edged higher to 7.3185 as markets await key Chinese PMI data due on Tuesday.
