Investing.com – The US dollar rose on Tuesday ahead of the final Federal Reserve policy meeting of the year, while stronger than expected earnings supported sterling.
At 05:40 ET (10:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 106.740, approaching on the highest levels in three weeks.
Strong dollar to Fed meeting
The dollar has maintained strength heading into the final policy meeting of the year, even with expectations that the US central bank will cut interest rates when the rally ends on Wednesday, by 25 bps to target range of 4.25%-4.50%.
Traders are bracing for Fed policymakers to be cautious about future rate cuts after Wednesday's reduction, especially after data released on Tuesday showed services sector activity jumped slightly senior three years.
The US, due later in the session, is also expected to show strong growth in November, giving the Fed the number of rate cuts expected in 2025 will be reduced when it releases its new projections.
“We think a wait-and-see approach may prevail today and favor further consolidation in the dollar's recent gains,” analysts at ING said in a note.
“Ultimately, unless the Federal Reserve signals a more dovish path than the market implies (and we don't think it will), the 2-year USD OIS rate is around 4.0% remains a major counter-seasonal factor that keeps the dollar from correcting meaningfully. in the soft month of December.”
Sterling stands up after wages data
In Europe, it traded broadly flat at 1.2680, with sterling holding its own against the dollar after data showed UK wages rose more than expected in the three months to October.
excluding bonuses, 5.2% higher in the three months to the end of October a year earlier, above forecasts of 5.0%.
The next meeting on Thursday is widely expected to keep rates unchanged, continuing their cautious approach to easing monetary policy while inflation concerns remain.
“There are still signs that the jobs market is cooling – eg, vacancies lower than pre-Covid – but clearly today's data offers reason for hawks to be higher in the MPC,” said ING.
slipped 0.2% lower to 1.0486, after survey data showed German business confidence worsened more than expected in December.
The Ifo institute said it fell to 84.7 in December from a slightly downwardly revised 85.6 in the previous month, weaker than the 85.6 forecast.
“The weakness in the German economy has become chronic,” said Ifo president Clemens Fuest.
Yuan has no customers
In Asia, it rose 0.1% to 7.2925, staying near a two-year high.
Data on Monday showed China's growth slowed sharply in November, reflecting continued weakness in consumer spending.
fell 0.2% to 153.78, as traders awaited the upcoming policy meeting, after a Reuters report that the central bank was likely to keep interest rates unchanged this week, the compared to earlier expectations of an increase.
