The U.S. dollar was largely unchanged in early European trading on Tuesday, ahead of the latest inflation data that could shape the path of U.S. monetary policy, while the British pound rose as U.K. workers continued to receive healthy wage increases.
As of 03:10 ET (08:10 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was flat at 105.516.
U.S. CPI to Drive Sentiment
Trading was largely range-bound on Tuesday as traders cautiously await the release later in the session of the U.S. Consumer Price Index for October, a number that is likely to drive trading sentiment ahead of the Federal Reserve’s December meeting.
Analysts expect the annual gain for the top-line number to rise 3.3% from the prior year, down from 3.7% in September, while it is expected to rise 0.1% for the months below the 0.4% increase seen the prior month.
Several Fed officials, including Chairman Jerome Powell, have warned that sticky inflation could see the central bank raise rates even further, and any signs that prices are proving harder to fall than expected are likely to increase bets on further rate hikes by the U.S. central bank – a scenario that bodes well for the dollar.
UK Wage Growth Remains Strong
In Europe, GBP/USD rose 0.2% to 1.2296 after data released early Tuesday showed that British wages grew at a slightly slower pace in the three months to September, but remained close to their record pace.
Earnings excluding bonuses were up 7.7% year-on-year in the third quarter, down slightly from 7.9% in the previous month but still enough to worry the Bank of England as it tries to combat still elevated inflation.
The unemployment rate remained at 4.2% in September, suggesting that the UK labor market remains healthy even after a series of interest rate hikes.
EUR/USD rose 0.1% to 1.0707 ahead of the release of the latest quarterly euro-zone growth figures, which are expected to show the impact of the European Central Bank‘s prolonged rate-hiking cycle.
For the third quarter, eurozone GDP is expected to fall by 0.1% quarter-on-quarter and rise by a meager 0.1% on an annualized basis.
However, ECB President Christine Lagarde said last week that interest rates will remain restrictive for at least several quarters as inflation remains elevated.
Yen Nears Three-Decade Low
In Asia, the USD/JPY fell to 151.64, with the Japanese yen hovering near its weakest level in a year against the greenback, although further losses in the currency were limited by renewed warnings from Japanese authorities that they will intervene in the currency markets.
The pair hit a one-year low of 151.92 on Monday, and a break below that level would mark a new 33-year low for the yen.
Japanese authorities intervened in the currency market in September last year to boost the yen for the first time since 1998.
USD/CNY rose 0.1% to 7.2942, with the yuan remaining weak after data showed that lending in the country continued to slow in October.
