Investing.com – The US dollar steadied on Thursday after the previous session's losses due to cooler inflation, while sterling slipped lower after the release of weak growth data.
At 04:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading slightly higher at 108.950, cutting three a day of loss.
Dollar is still high
The dollar fell on Wednesday after the release of an unusual report, which followed a tight reading on US producer prices on Tuesday.
“Global asset markets have had a positive 24 hours driven largely by the US core CPI reading which was slightly below consensus for December,” analysts at ING said in a note.
“However, sticky headwinds and core inflation near 3% YoY continue to cast doubt on the Fed's ability to cut this year and only 36bp of Fed easing is priced in for 2025.”
The greenback remains high ahead of Donald Trump's inauguration next week as his plans to impose stiff tariffs on allies and foes alike have fueled concerns about price pressures.
Data is due later in the session, but today's forex focus is likely to be on the Senate confirmation hearing of Scott Bessent, Trump's nominee for US Treasury Secretary.
“He will be questioned about the dollar, taxes, and the upcoming fiscal table. We do not think it will disturb the strong position of the dollar yet,” said ING.
Sterling falls on weak GDP data
In Europe, it traded 0.3% lower to 1.2199, after data released earlier on Wednesday showed that the British economy barely returned to growth in November.
Gross domestic product rose 0.1% from October, according to official data, marking the first month-on-month rise since August after falling in September and October. However, this was still below the 0.2% increase forecast.
The Bank of England is now widely expected to cut interest rates in February, with two rate cuts in 2025 almost fully priced into the market.
fell slightly to 1.0290, with German and Italian inflation data confirming that prices remained subdued in December.
“Yesterday gave EUR/USD a good opportunity to rally. Two-year rate spreads narrowed by 5bp on the 0.2% reading on US core CPI. But EUR/USD struggled to hold the rally to 1.0350. It is not very impressive and probably represents a confirmed opinion that the eurozone and the euro will not overperform this year on weak growth and weak leadership in the region,” said ING.
The European Central Bank was widely expected to cut interest rates by around 100 basis points in 2025, much more than the Federal Reserve, suggesting more weakness ahead for the single currency.
Yen is gaining more
In Asia, it fell 0.4% to 155.75, falling to its lowest level since mid-December.
The yen rose this week when BOJ Governor Kazuo Ueda indicated that the central bank will consider raising interest rates when it meets next week, amid steady growth in inflation and wages.
traded largely unchanged at 7.3317, hovering around a 16-month high, as focus turns to key fourth-quarter gross domestic product data due on Friday.
