By Peter Nurse
Investing.com - The U.S. dollar edged lower in early European trade Wednesday, but remained near a 20-year high as traders sought out this safe haven in the face of renewed recession fears, soaring gas prices, and political uncertainty in the U.K.
At 2:55 AM ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 106.285, just off its overnight 20-year peak at 106.57.
EUR/USD fell 0.1% to 1.0260, marginally above its overnight low of 1.0236, its weakest since late 2002, following the publication of S&P GIobal's composite purchasing managers index for the single currency bloc, which registered its lowest reading in 16 months and pointed to an oncoming recession.
Adding to the negative sentiment are fears of gas rationing in Europe as Russia threatens to cut supplies further. German and French year-ahead power prices are around record highs as regulators try to ensure enough gas is bought for storage as the winter approaches.
German factory orders provided a rare piece of good news, rising by 0.1% in May from April, climbing for the first time in four months in May. Attention now turns to the release of Eurozone retail sales figures later in the session, with the key release expected to post a 0.4% monthly rise in May.
GBP/USD fell 0.3% to 1.1923, near to a two-year low with Prime Minister Boris Johnson under severe pressure after Tuesday’s resignation of two top government ministers, both saying he was not fit to govern.
USD/JPY fell 0.6% to 135.04, with the Japanese yen, another safe haven, in demand, while the risk-sensitive AUD/USD down 0.3% to 0.6780, under pressure on worries over the global economy.
The release of the minutes from the last Federal Reserve meeting will be of particular interest later in the session, with this get-together resulting in the U.S. central bank raising interest rates by 75 basis points, its largest hike since 1994.
Traders are bracing for another 75-basis-point rate hike at the end of the month, with inflation remaining at highly elevated levels, and this has resulted in the yield of the 2-year Treasury climbing above that of the benchmark 10-year Treasury. This is usually taken as a sign of an upcoming recession.