Dollar Down Ahead of Fed Minutes 

The dollar weakened in early European forex trading on Wednesday. The Federal Reserve’s minutes were in focus and inflation being stronger than expected has boosted sterling.

At 2:50 AM ET (0650 GMT), the Dollar Index was down by 0.1% at 92.222. USD/JPY rose by 0.1% to 105.50, while EUR/USD gained 0.1%, to1.1943. It has hit a fresh 28-month high of $1.1954 overnight.

The safe-haven greenback hit fresh lows against most major currencies overnight. The ongoing effects of the Federal Reserve’s stimulus programs and reduced expectations for a fresh fiscal stimulus, weakening the greenback broadly.

With this in mind, forex investors will keep a wary eye on the release, later on Wednesday, of the minutes. This is from the July FOMC meeting. Thus people are looking for hints over the central bank’s next move.

There is now speculation that it will choose to adopt an average inflation target.

The U.S. central bank has a mandate to ensure stable inflation. Most see it as being around the 2% level.

However, it has been below this level for some time. Thus, if the Fed was to adopt an average inflation target, it would need to push inflation above 2%.

Generally, high inflation is seen as bad for the relevant country’s currency.

Analysts at ING said that, all in all, with a bearish trend consolidating, the dollar appears to have some hope. That’s for a less-dovish-than-expected message in the Fed minutes.

Sterling Gains as Dollar Weakens

Forex news reports the sterling has posted strong gains against the dollar. The GBP/USD was up by 0.2% to $1.3261, above Tuesday’s eight-month high of $1.3241.

This represents a dramatic turnaround for the sterling. The currency plummeted in March to the lowest level in more than three decades. But has now erased this year’s drop.

What helped it was the release of the latest inflation data earlier Wednesday. For July, it showed an unexpected rise to its highest rate since March.

The Office for National Statistics said that consumer price inflation rose to 1.0% in July from 0.6% in June. Core inflation, typically excluding volatile energy, food, alcohol and tobacco prices also rose to 1.8% from June’s 1.4%.

However, a bumpy path lies ahead for the pound. The U.K.’s and Europe’s negotiators undertake another round of talks on a trade deal. This is on the back of the U.K.’s departure from the bloc.