The dollar weakened on Wednesday ahead of the release of several key economic indicators in the United States, including October’s inflation data, which could increase the likelihood of a U.S. interest rate cut in December.
The American currency fell by 0.30% against the euro, trading at $1.0521, and dropped 0.32% against the pound, now at $1.2610.
Investors remain cautious as they await the announcement of third-quarter U.S. growth figures, weekly jobless claims, and the October Personal Consumption Expenditures (PCE) index, a crucial measure of inflation for the Federal Reserve (Fed).
The PCE index was recorded at 2.1% year-on-year in September; however, analysts expect it to increase to 2.3% for October, according to consensus estimates from MarketWatch and Bloomberg.
Should the inflation data fall within expectations, “investors will likely continue to support the hypothesis of another quarter-point rate cut in December,” which would further weaken the dollar, analysts predict. Additionally, disappointing growth figures are expected to reinforce this probability.
The minutes from the Fed’s early November meeting, released Tuesday evening, indicate that the central bank is adopting a cautious stance regarding interest rate reductions, analysts note. They suggest that the U.S. central bank is likely to maintain this gradual easing approach “if the economy continues to perform in line with its expectations.”
