U.S. Dollar Rises Ahead of Fed Minutes as Sterling Gains Despite Softer UK Inflation
The U.S. dollar moved slightly higher on Wednesday as investors awaited the release of the Federal Reserve’s latest meeting minutes. At the same time, sterling strengthened even though new data showed cooling U.K. inflation.
At 04:30 ET (09:30 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, climbed 0.1% to 97.180. The move followed two consecutive sessions of gains.
Dollar Supported by Strong Data and Geopolitical Developments
The dollar has advanced modestly this week, supported by stronger-than-expected U.S. economic data. Recent reports, including last week’s jobs numbers, pointed to resilience in the labor market. Durable goods orders and industrial production data also offered constructive signals.
Geopolitical developments added to the supportive tone. The United States and Iran reached an understanding on key “guiding principles” during indirect nuclear talks. Meanwhile, Ukraine and Russia concluded the first round of U.S.-mediated peace negotiations in Geneva.
Markets now turn their attention to the minutes of the Federal Reserve’s January meeting. The Fed kept interest rates unchanged at that meeting and warned that risks to inflation and the labor market persist.
Analysts expect the minutes to confirm a broad consensus around maintaining the current policy pause. Such confirmation could temper expectations for approximately 59 basis points of rate cuts this year.
Uncertainty remains over the possible appointment of Kevin Warsh as Federal Reserve Chair in May. Investors are watching closely for confirmation hearing dates, as leadership changes could influence the dollar outlook.
Sterling Advances Despite Lower UK CPI
In Europe, GBP/USD rose 0.1% to 1.3570. The pound gained ground even after U.K. inflation slowed to its lowest level since March of last year.
Annual consumer price growth eased to 3.0% in January from 3.4% in December. Transport, food, and non-alcoholic beverage prices increased at a slower pace.
However, inflation details were mixed. Food price pressures declined sharply, which may ease concerns about broader inflation persistence. On the other hand, services inflation remains elevated, and the Bank of England’s core services measure ticked slightly higher.
EUR/USD slipped 0.1% to 1.1836. The euro weakened following a Financial Times report suggesting European Central Bank President Christine Lagarde could leave her position early ahead of France’s presidential election next year. Her term officially runs until October 2027.
Attention may now shift toward potential successors, including Spain’s Pablo Hernández de Cos and Germany’s Joachim Nagel. For now, markets appear to view the development as premature to significantly impact the euro.
Yen Weakens After Trade Data
In Asia, USD/JPY rose 0.2% to 153.66. Japanese data showed exports surged 16.8% year-on-year in January, while imports declined. The trade deficit narrowed to ¥1.15 trillion, smaller than expected.
The United States and Japan also outlined initial details of Japan’s $550 billion investment commitment to the U.S. economy. The first project includes a $33 billion natural gas facility investment in Ohio, managed by a SoftBank subsidiary.
Analysts note that direct Japanese investment into the U.S. will remain an important factor influencing USD/JPY movements this year.
Elsewhere, USD/CNY held steady at 6.9087, near three-year lows, as Chinese markets remained closed for the week.
The Australian dollar fell 0.2% to 0.7071, while the New Zealand dollar dropped 0.7% to 0.6003. The Reserve Bank of New Zealand kept its official cash rate unchanged at 2.25% and signaled that monetary policy would stay supportive as inflation moves back toward its 2% target. The central bank expects price growth to ease further amid spare capacity and moderate wage pressures.
