At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 102.387, not far from Friday’s seven-week high of 102.69.
The dollar has been in demand since Friday’s strong payrolls report prompted the market to largely rule out the chance of another 50 basis point cut in November, in favor of a more traditional 25 bps reduction.
Investors now have about an 85% chance of a quarter basis point reduction priced in, as well as a slim probability the Fed will leave rates unchanged, the CME FedWatch tool showed.
Attention now turns to the release of the minutes of the Fed’s September meeting, due later in the session.
The central bank decided to cut rates by a hefty 50 bps at this meeting, and the minutes will likely offer up the rationale behind that decision. That said, Fed policymakers have been out in force over the last few days and so it’s debatable the minutes can offer anything new.
The consumer price index for September is due on Thursday, and is also likely to factor into the Fed’s outlook.
In Europe, EUR/USD fell 0.2% to 1.0962, with the euro weakening despite the release of better than expected German trade data in August, prompting hope of a recovery in the eurozone’s largest economy.
German exports rose by 1.3% in August on a monthly basis, official data showed on Wednesday, defying expectations for a drop of 1.0%.
The European Central Bank meets next week, and is expected to ease policy once more having already cut rates twice this year as economic growth has weakened while inflationary pressures have eased.
“A cut is very likely and it will not be the last one, the rhythm depending on how the fight against inflation evolves,” ECB policymaker Francois Villeroy de Galhau said on Wednesday, in an interview.
GBP/USD fell 0.2% to 1.3081, not far removed from Monday’s three-week low of 1.3059.
“The UK press is starting to reach a fever pitch with its speculation over what Chancellor Rachel Reeves will present in her first budget on 30 October,” said analysts at ING, in a note. “Investors remain on the lookout for any signs that the UK Gilt market is becoming nervous again about potential spending plans.”
NZD/USD fell 0.9% to 0.6085, with the Kiwi dollar falling to its lowest level since Aug. 19 after the Reserve Bank of New Zealand cut interest rates by 50 basis points and left the door open to yet more aggressive monetary easing.
USD/JPY rose 0.2% to 148.53, after touching a seven-week high of 149.10 on Monday.
The yen could see volatile trading in the next few weeks, given Japan has an election set for Oct. 27, ahead of the Bank of Japan’s October monetary policy meeting and the U.S. presidential election next month.
USD/CNY rose 0.1% to 7.0643, after the pair surged 0.6% in the prior session, as onshore trade resumed after the Golden Week holiday.
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