Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Dollar Edges Lower; Sterling in Focus ahead of U.K. Budget

Published 27/10/2021, 07:32
Updated 27/10/2021, 07:32

By Peter Nurse

Investing.com - The dollar edged lower in early European trade Wednesday in calm trading ahead of next week’s Federal Reserve meeting, while the U.K. budget places sterling in focus.

At 2:30 AM ET (0630 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 93.892.

USD/JPY traded 0.1% lower at 114.03, EUR/USD edged 0.1% higher at 1.1603, while GBP/USD slipped marginally to 1.3763 ahead of Britain’s annual budget.

The Federal Reserve has now gone into a blackout period ahead of next week’s policy-setting meeting, and ahead of this traders are focusing on the release of a series of important data releases.

Wednesday’s sees the release of the September durable goods orders, but the 3Q GDP release on Thursday and the September core PCE deflator on Friday will attract the most attention.

Elsewhere, AUD/USD rose 0.2% to 0.7513 after Australian core inflation rose at its fastest annual pace since 2015, prompting traders to price in earlier hikes in interest rates.

The headline consumer price index rose 0.8% in the third quarter and 3.0% for the year, much as expected, but the annual measure of core inflation accelerated to 2.1%, well above the 1.8% expected and putting it back in the RBA's 2% to 3% target range for the first time in six years.

Sterling could be vulnerable Wednesday as U.K. Chancellor of the Exchequer Rishi Sunak delivers his annual budget. 

Much of the talk ahead of this set piece has been about Sunak loosening the purse strings, following leaks that he is set to end the public sector pay freeze, but the Chancellor still faces a tricky balancing act in this year’s budget. Too much largesse and he risks sparking more inflation with the Bank of England already looking at tightening monetary policy, but too little and he risks strangling an already hesitant recovery.

“The pre-budget leaks have typically involved new spending plans rather than how this is going to be paid for. That does perhaps leave GBP a little vulnerable tomorrow should the UK Chancellor announce any kind of fiscal consolidation,” said analysts at ING, in a note.

USD/CAD traded largely flat at 1.2391 ahead of the Bank of Canada latest policy-setting meeting later this session. The central bank is expected to reduce its weekly government bond purchases again, marking the fourth time over the past 12 months the central bank has rolled back its program, paving the way for the start of interest rate increases next year.



Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.