© Reuters.
By Peter Nurse
Investing.com — The dollar strengthened in early European trading Wednesday, extending recent gains ahead of U.S. inflation data which could influence Federal Reserve’s tapering thinking.
At 2:55 AM ET (0755 GMT), the , which tracks the greenback against a basket of six other currencies, traded around 0.1% higher at 93.097, hitting its highest level since the start of April.
rose 0.1% to 110.67, the highest since mid July, was largely flat at 1.1717, near a four-month low, was 0.1% lower at 1.3830, near a two-week low, while the risk-sensitive fell 0.1% at 0.7340.
The dollar has been on the rise of late, as improving U.S. labor data and a more hawkish tone from Federal Reserve policymakers have led markets to expect the central bank to begin tapering its asset purchases later this year.
Friday’s official U.S. jobs report impressed, with rising by 943,000 in July and numbers for May and June also being revised higher.
Now the attention turns to the second leg of the Fed’s dual mandate, with the consumer price index for July due out from the Bureau of Labor Statistics at 8:30 AM ET (1230 GMT).
Analysts are looking for a gain in the of 5.3% over last year, marginally lower than June’s 5.4%, which was the biggest monthly gain since August 2008.
, which excludes food and energy prices, is expected to have climbed 4.3% in July from a year ago against the 4.5% jump in June, which was the quickest pace of increase since September 1991.
Fed Chair Jerome Powell has consistently said the elevated inflation numbers will turn out to be transitory as the economy fully reopens, but another high release could add pressure to the tapering debate.
Chicago Fed President Charles Evans took a dovish slant on Tuesday, saying the current inflation spike shouldn’t push the Federal Reserve to tighten monetary policy prematurely, but he’s in the minority this week with a couple of his colleagues stating on Monday that inflation is already at a level that could prompt tightening.
“Markets would hardly be surprised over a sizzling inflation report in July,” said analysts at Nordea, in a note. “We expect core inflation around 4.8%, likely unhinging Powell and expediting the talk about tapering as early as in September.”
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
