Title: Dollar Edges Lower; Eurozone Inflation Data in Focus
Aug 30, 2022 03:04AM ET
The U.S. dollar was lower in early European trading on Tuesday, retreating from a 20-year high as attention turned to Europe, with euro zone inflation data on Wednesday likely to point to an aggressive ECB rate hike next month.
The dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 108.733, having retreated from 109.48 overnight, a level not seen since September 2002.
The dollar surged late last week after Federal Reserve chief Jerome Powell made a firm commitment to raise interest rates to curb inflation, even at the cost of slowing economic growth.
That means upcoming economic data, and Friday's monthly nonfarm payrolls in particular, will be closely watched as investors try to figure out whether the central bank can pull off an economic slowdown without triggering a recession.
In addition, August CPI figures for the Eurozone will be released on Wednesday, with annual inflation expected to accelerate to 9.0% from 8.9% in July, well above the ECB's 2% target.
Isabel Schnabel, a member of the European Central Bank's Governing Council, acknowledged this over the weekend, stating that central banks risk losing public confidence and must now act forcefully to combat inflation, even if it drags their economies into recession.
EUR/USD rose to 0.9997 after rising 0.3% on Monday, its biggest gain in nearly three weeks.
Meanwhile, GBP/USD rose 0.1% to 1.1721, recovering from a nearly two-and-a-half-year low of 1.1649 reached on Monday. The risk-sensitive USD/JPY fell 0.2% to 138.49, after rising to 139 overnight for the first time since mid-July, while the risk-sensitive AUD/USD rose 0.1% to 0.6912.
USD/CNY rose 0.1% to 6.9149, with the pair near a two-year high after China's finance minister indicated the country's authorities would step up measures to boost demand and stabilize employment and prices in the second half of the year, which could lead to looser monetary policy.