Investing.com - The U.S. dollar traded marginally higher in early European trade Wednesday, as traders awaited the release of the minutes from the latest Federal Reserve meeting for further clues of the path of U.S. interest rates.
At 04:05 ET (09:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 104.102.
Fed minutes could determine dollar direction
The dollar has slipped back slightly of late after waning expectations of early interest rate cuts by the Fed had seen the greenback climb to three-month highs.
The currency’s upcoming direction could well be decided by what the minutes from the January Federal Reserve meeting, due for release later Wednesday, indicate in terms of the outlook for U.S. rates.
“Recall this was seen as a pretty neutral meeting until Fed Chair Jerome Powell used an opportunity in the press conference to say that a March rate cut was unlikely,” said analysts at ING, in a note.
Traders are currently pricing in around 90 basis points worth of easing by the Fed this year, probably starting in June.
Beyond the minutes, a slew of Fed officials are also set to speak this week, including Raphael Bostic and Michelle Bowman later on Wednesday.
Eurozone consumer confidence data due
In Europe, EUR/USD edged higher to 1.0807, ahead of the release of the latest consumer confidence figure for the eurozone.
This is expected to show a small improvement in February from the previous month, although it will likely remain very weak.
“If there is a ray of light for the eurozone economy it may be that wage growth is not falling as quickly as inflation and that there may be a boost from rising real incomes after all,” said ING.
GBP/USD traded marginally lower at 1.2616, after data showed that Britain recorded its highest ever budget surplus in January as Chancellor Jeremy Hunt prepares his annual budget.
The U.K. recorded a budget surplus of £16.7 billion in January, due to record seasonal tax inflows, although the broader fiscal picture remains tough.
Chinese economic recovery on way?
In Asia, USD/CNY edged lower to 7.1891, with data showing increased consumer spending and travel demand during the Lunar New Year holiday, lifting hopes for a bigger recovery in consumption - which is a key driver of the Chinese economy.
The People’s Bank of China also cut its five-year loan prime rate by a bigger-than-expected margin on Tuesday, pointing to more support for the Chinese economy.
USD/JPY rose 0.1% to 150.14, with the pair remaining above the widely-watched 150 level after data showed a bigger-than-expected increase in Japanese exports in January, while imports contracted more than expected.
Breaks above 150 have attracted government intervention in the past, with officials also offering verbal warnings on any such moves last week.