Dollar edges higher ahead of Fed minutes; sterling gains after CPI increase

Investing.com - The U.S. dollar edged higher Wednesday, as traders awaited the release of the minutes from the Federal Reserve’s last policy meeting and then the annual Jackson Hole symposium for clues about its future monetary policy path.

At 04:55 ET (08:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 98.190, after gaining a combined 0.4% over the first two days of the week.

Fed minutes loom large

There hasn’t been much progress in the Ukraine situation over the last 24 hours or so, and attention will thus be mainly on the minutes of the last Federal Reserve meeting, due for release later in the session.

The Fed has maintained its policy rate in the 4.25%-4.50% range for all of this year, with some policymakers, and Powell in particular, expressing worries that the Trump administration’s tariffs could reignite inflation.

However, this stance has resulted in severe criticism from President Donald Trump, and some Fed officials have recently broken ranks, calling for lower interest rates.  

These minutes could show how deep divisions run after Governors Christopher Waller and Michelle Bowman dissented at the last meeting, marking the first time two voting Fed officials have done so since 1993.

The minutes “will air more of the views of the two dissenters (Waller and Bowman) who voted for a rate cut in July,” said analysts at ING, in a note. “Market moves, however, may be limited given that the July jobs report was released a few days later. A much better read on the Fed situation should emerge on Friday afternoon during Chair Powell’s speech at Jackson Hole.”

The annual Jackson Hole gathering kicks off with informal interviews ahead of the formal agenda release on Thursday evening. Powell’s key address on Friday morning will focus on the economic outlook.

“In all, we don’t see the need for big DXY moves today and struggle to see it breaking above 98.50/60 resistance,” ING added.

Sterling gains after U.K. inflation 

In Europe, EUR/USD slipped 0.1% to 1.1638, drifting lower in quiet markets.

Inflation for the eurozone as a whole is scheduled for release later in the session, and is expected to show that the annual CPI figure remained at 2.0% in July, matching the European Central Bank’s medium-term target.

“EUR/USD should continue to trade in narrow ranges and we do not see the need for it to break under 1.1590/1600 today,” ING added.

GBP/USD traded 0.1% higher at 1.3497, after U.K. consumer price inflation increased to 3.8% in July from 3.6% in June, above the consensus forecast of 3.7%, according to official data released Wednesday. This was the highest for the headline number since January 2024.

Despite the rising inflation, analysts at Capital Economics maintain that a November interest rate cut remains possible, but they acknowledge the risk that inflation expectations and wage growth could rise further, potentially delaying the next rate cut until 2026.

Kiwi dollar slumps after rate cut

Elsewhere, USD/JPY traded 0.1% lower to 147.58, while USD/CNY slipped slightly to 7.1787 after the People’s Bank of China kept the one-year Loan Prime Rate at 3.0% and the five-year at 3.5%, as expected.

AUD/USD dropped 0.3% to 0.6434, and NZD/USD slumped 1.3% to 0.5818 to its lowest level since mid-April after Reserve Bank of New Zealand trimmed the official cash rate by 25 basis points to 3.00% on Wednesday and signalled scope for further easing if inflation pressures continue to ease.

The Monetary Policy Committee voted 4-2 for Wednesday’s move, with two members preferring a larger 50 basis point cut.