The U.S. dollar pared its gains against its main rivals on Wednesday, as the boost it received from a falling British pound wore off and traders watched for what’s ahead in the day.
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What are currencies doing?
The ICE U.S. Dollar Index DXY, +0.04% , which measures the buck against its six main rivals, was little changed in negative territory at 89.483. The broader WSJ U.S. Dollar Index BUXX, +0.00% was also little changed though in the green at 83.63.
The pound GBPUSD, -0.4899% dropped to $1.4227 from $1.4290 late Tuesday in New York.
The euro EURUSD, +0.1617% strengthened on Wednesday, shaking off disappointing inflation figures. It was recently changing hands at $1.2390, down from $1.2370 late Tuesday in New York.
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The dollar was up against the yen USDJPY, +0.16% buying ¥107.23 compared with ¥107.00 on Tuesday.
The buck also gaines against the Swiss franc USDCHF, -0.0828% buying 0.9675 francs, up from 0.9663 late Tuesday in New York.
Against the Canadian dollar USDCAD, +0.1036% the greenback rose to C$1.2566 from C$1.2550.
What is driving the market?
The British pound had one of the biggest intraday moves early on in Wednesday’s session, which came after a report showing that U.K. inflation cooled more than expected in March. Consumer prices rose an annual 2.5% that month, compared to 2.7% recorded in February.
The cooler inflation figure is reducing odds that the Bank of England will raise interest rates in its May meeting, which was weighing on sterling. The currency had traded as high as $1.4377 intraday Tuesday, hitting a new post-Brexit referendum peak. Even with Wednesday’s slide, it’s still showing a sizable gain against the dollar for the past 12 months, up about 11%.
The weak inflation figures didn’t stop in the U.K. and looked similar across the eurozone, with harmonized EU CPI at 1.3% in March, versus consensus estimates of 1.4%.
For the rest of day, traders will be shifting their focus to the Federal Reserve’s Beige book release, as well as the Bank of Canada, which will announce its rate decision at 10 a.m. Eastern. No changes to the key policy interest rate of 1.25% are expected.
What are strategists saying?
“The cooling of the cost of living has prompted traders to take their profits on the pound,” said David Madden, market analyst at CMC Markets UK, in a note. “The wider upward trend is still in place however, so the medium-term outlook remains intact.”
What else is in focus?
The U.S. economic calendar is light on Wednesday, with the Federal Reserve’s beige book due at 2 p.m. as the only major release. It will give anecdotal evidence on economic conditions from the central bank’s 12 districts.
Check out: MarketWatch’s Economic Calendar
In Fed speakers, New York Fed President William Dudley is due to give a speech on the economic outlook at a college in New York City at 3:15 p.m. Eastern. After that, the Fed’s vice chair for bank supervision, Randal Quarles, is slated to make remarks to the Bretton Woods Committee in Washington, D.C., at 4:15 p.m. Eastern.
In other asset classes, stock futures are pointing up as earnings season is in full swing, with both the Dow Jones Industrial Average YMM8, +0.28% and S&P 500 ESM8, +0.21% set to open in the green.