Anna 
London, November 15, 2023 – The U.S. dollar made a modest recovery in early European trade on Wednesday, striving to bounce back from the significant losses incurred in the previous session. This comes as subdued U.S. inflation data fueled expectations that the Federal Reserve might conclude its monetary tightening cycle.
At 03:05 ET (08:05 GMT), the Dollar Index, tracking the greenback against a basket of six other currencies, rose 0.1% to 104.057, not far from Tuesday’s two-month low of 103.98.
The dollar faced a notable decline on Tuesday following data that revealed unchanged U.S. consumer prices in October. The annual figure climbed 3.2%, falling below expectations and marking the smallest increase in two years after a 3.7% rise in September.
Sticky inflation has been a focal point for the Federal Reserve, maintaining its hawkish stance. The unexpected downside surprise prompted a reevaluation by traders, diminishing the likelihood of another rate hike this year and redirecting attention to potential rate cuts.
Analysts at ING noted, “We still think that the decisive blow to ‘de-throne’ the dollar will have to be given by a turn lower in activity data, which can make markets feel comfortable with pricing in more rate cuts. So, we will be looking with some interest at retail sales figures.”
Later in the session, U.S. retail sales data for October is expected, with analysts anticipating a 0.3% drop from the previous month.
In Europe, GBP/USD slipped 0.2% to 1.2475 after British inflation cooled more than expected in October, reaching 4.6% on an annual basis, a sharp drop from 6.7% in September—the smallest increase in two years.
EUR/USD declined 0.1% to 1.0867 after reaching its highest level since August on Tuesday. The latest eurozone industrial production release is awaited, expected to show a significant drop in September.
USD/JPY rose 0.2% to 150.66 in Asia, with the Japanese yen’s recovery from its one-year low impeded by weaker-than-expected gross domestic product data. Data on Wednesday revealed that Japan’s GDP contracted more than anticipated in the third quarter.
USD/CNY fell 0.2% to 7.2398 as the yuan received support from government data showing Chinese industrial production and retail sales exceeding expectations in October, indicating positive effects of recent stimulus measures from Beijing.
The currency markets continue to navigate shifting expectations surrounding central bank policies and economic data releases, influencing trading dynamics globally.
