By Peter Nurse
Investing.com – The dollar edged lower in Europe Wednesday, but remained at elevated levels with global growth concerns, caused by the ongoing Covid outbreak, prompting traders to cut back on their positions with riskier currencies.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 93.093, just below the one-week high it hit on Tuesday.
USD/JPY edged higher to 109.59, EUR/USD was 0.1% higher at 1.1719, after falling to 1.1702 in the Asia session, its lowest since November 2020, while GBP/USD was largely unchanged at 1.3744, despite U.K. inflation slowing more sharply than expected to 2.0%, the Bank of England’s target, in July.
The dip in U.K. inflation is likely to be temporary, analysts said, pointing to sharp rises in household energy bills this year and sustained pressure on supply chains. “There’s little doubt that headline CPI will go well above 3% later this year,” said ING economist James Smith in a note to clients. “It’s not difficult to see inflation coming fairly near to the Bank of England’s forecast of 4% in around November.”
U.S. retail sales dropped 1.1% in July, a lot more than the 0.3% decline expected, according to data released Tuesday. This added to the disappointing growth numbers from China earlier in the week, causing traders to question the global growth profile as many countries struggle to deal with its latest Covid-19 outbreak.
Although a lot of the focus has been on the recent rise in coronavirus cases in China, the U.S. recorded more than 1,000 Covid-19 deaths on Tuesday, according to Reuters data, with the areas that have low vaccination rates particularly hard hit.
Investors are now looking to the minutes from the U.S. Federal Reserve’s latest meeting, due to be released later in the day, for clues to the central bank’s timeline for asset tapering and interest rate hikes.
The Fed will also hold its Jackson Hole symposium in the following week, which could also provide more clues, especially as many market participants expect the central bank to announce plans to ease off bond buying at either its September or November policy meeting.
Elsewhere, NZD/USD traded flat at 0.6924 after volatile trading overnight in the wake of the Reserve Bank of New Zealand’s decision to keep interest rates unchanged, instead of raising them for the first time since 2014, as widely expected.
The pair initially fell to a nine-month low at 0.6868, but it soon recovered after the central bank explained that it largely held off on raising rates because of the snap Covid-induced lockdown in the country and hikes were still to be expected in the near future.
Dollar Edges Off Highs Ahead of Release of Fed Minutes
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