The dollar was little changed and did not touch Wednesday’s session lows as investors focused on a European Central Bank meeting and the upcoming U.S. Consumer Price Index report to help assess the current pace of economic recovery.
Both are expected on Thursday, and investors have taken a wait-and-see stance, leaving major currencies in a recently limited range.
Consumer price data from the U.S. Department of Labor was eagerly awaited after last month’s report showed consumer prices rose the most in nearly 12 years in April, fueling the view that higher prices could last longer than some expect. read more Economists polled by Reuters predict that the CPI rose 0.4% in May.
Earlier, Chinese producer price data for May showed the biggest increase in a dozen years, and the country’s consumer prices rose 1.3% in May – the biggest increase in year on year in eight months – but below expectations. Read more
With the ECB, investors will be on the lookout for any hint of an impending slowdown in its bond buying program.
The Bank of Canada on Wednesday left its key rate unchanged as expected and said it would maintain its current quantitative easing policy. He also reiterated his forecast that rates would remain unchanged until at least the second half of 2022.
The Canadian dollar appreciated against the greenback following the announcement. In afternoon trading it was stable at 1.21 per dollar.
The dollar index was up 0.03% to 90.14, with the euro also almost unchanged at $ 1.2176.
The message that has started to resonate with investors is that central bank policymakers will “eliminate high prices in the short term,” which has led to a weaker US dollar, said Adam Button, chief currency analyst at ForexLive in Toronto.
“The inflation numbers are going to be higher than they expect in the short term, but there is a strong consensus among central banks around transitory inflation,” he said.
The dollar rose 0.1% against the yen to 109.62 yen, while the pound fell 0.3% to $ 1.4111.
The pound slipped as Britain and the European Union failed to agree on solutions to post-Brexit trade problems in Britain’s province of Northern Ireland and exchanged deadlocked threats who could claim the international summit of the G7.
Deutsche Bank’s currency volatility index (.DBCVIX) hit its lowest level since February 2020 on Tuesday and fell further on Wednesday.
While the ECB is expected to keep policy parameters stable, the euro could be sensitive to changes in the bank’s economic forecast or any signal that the pace of bond purchases may be reduced in the coming months.
Investors are also watching negotiations in Washington over possible infrastructure spending, which could also have an effect on the pace of US growth. U.S. lawmakers said on Wednesday that a bipartisan group of 10 senators were discussing the possibility of revitalizing U.S. roads and bridges without raising taxes, after President Joe Biden on Tuesday rejected a separate Republican proposal. Read more
Bitcoin recovered from a three-week low it hit on Tuesday when signs of caution from institutional investors and regulatory attention led to the sell-off. It last increased 8% to $ 36,114.
Price of currency offers at 3:31 p.m. (1931 GMT)
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