Anna 
In early European trade on Tuesday, the U.S. dollar continued its retreat, reaching a more than 2-month low just before the release of the Federal Reserve’s meeting minutes. At 04:10 ET (09:10 GMT), the Dollar Index, tracking the greenback against a basket of six other currencies, slipped 0.2% to 103.135, reaching levels last observed in late August.
Dollar Retreats Ahead of Fed Minutes
The dollar index has experienced declines in seven of the last eight sessions, influenced by weak labor market and inflation readings, prompting speculation that the Federal Reserve has concluded its rate-hiking cycle, and future cuts are likely. Traders have priced in a 30% chance of the Fed initiating rate cuts as early as March 2024.
The minutes from the Fed’s October meeting, where policymakers decided to maintain rates, are anticipated later in the session and could offer insights into future monetary policy. Analysts at ING noted, “The market seems in the mood to look out for some dovish headlines here, and this can prove a negative dollar event risk.”
Euro and Sterling Rise to 2-Month Highs
In Europe, EUR/USD increased by 0.2% to 1.0955, reaching its highest level since mid-August, despite weak economic growth in the eurozone. European Central Bank (ECB) policymakers, including Governor of the Bank of Spain Pablo Hernandez de Cos and his French counterpart Francois Villeroy de Galhau, emphasized that it is premature to discuss interest rate cuts, suggesting rates have reached a plateau.
ECB President Christine Lagarde’s upcoming speech will be closely scrutinized for clues on future policy. GBP/USD rose 0.2% to 1.2532, nearing a two-month peak, with U.K. inflation, though recording the largest monthly fall in the annual CPI rate since April 1992 in October, remaining among the highest in the developed world. Bank of England Governor Andrew Bailey reiterated the commitment to address inflation.
Asian Currencies Post Strong Gains
In Asia, USD/CNY fell 0.5% to 7.1335, with the yuan reaching an almost four-month high after China’s central bank set the midpoint of the yuan’s trading band at its strongest level since Aug. 7. USD/JPY traded 0.6% lower at 147.47, with the yen at its strongest level against the dollar in three months, leading to reduced expectations of Japanese authorities intervening in currency markets.
