The Dollar weakens in early European trade

The U.S. currency weakened in early European trade Wednesday. The currency handed back some of the previous session’s sharp rises. As we know, the dollar’s rise came after a surge in U.S. inflation raised expectations of an early move by the Fed to tighten monetary policy.

Moreover, the U.S. dollar index, which tracks the dollar versus a basket of major currencies, fell by 0.1% and traded at 92.698. As we know, in the previous session, it traded at 92.832, close to a three-month high of 92.844 touched last week.

The dollar against the Japanese yen declined by 0.1% and traded at 110.48. Meanwhile, the euro gained 0.1% against the U.S. dollar to 1.1789, close to its three-month high of 1.1772. The risk-sensitive currency, the Australian dollar, surged 0.2% against the greenback to 0.7460.

Additionally, U.S. consumer prices increased by 0.9% in June, the most in 13 years. Meanwhile, the year-on-year figure surged 5.4% as the economic recovery gathered momentum.

According to Kathy Lien, an analyst at BK Asset Management, while everyone expected price pressures to increase, the report shows how significant the problem has become. The increases are more widespread, which indicates prices can remain high for longer.

Fed Chair Jerome Powell testifies on Wednesday and Thursday

As we know, Fed Chair Jerome Powell testifies before Congress on Wednesday and Thursday. Traders are waiting for any clues on the timing of a tapering of stimulus and higher interest rates.

The British pound against the dollar increased by 0.2% and traded at 1.3837. Additionally, U.S. consumer prices surged 2.5% on the year in June, the biggest increase since August 2018.

Remarkably, this will raise the pressure on the Bank of England to act. The data also revealed factory gate prices surging more slowly, suggesting that the impact of the sharp commodity price rises is fading.

The New Zealand dollar against the greenback rose by 1.2% to 0.7026. Remarkably, New Zealand’s central bank ended its NZ$100 billion bond-buying program, effectively indicating that an interest rate hike was near.

The country’s economy has been less affected by the coronavirus pandemic than many. It boosted 1.6% in the first quarter, increasing concerns that the stimulative monetary policies could lead to overheating.

There are more central bank meetings due Wednesday. The Bank of Canada is anticipated to publish further asset tapering. The dollar against the Canadian dollar fell by 0.1% at 1.249.

At the time of writing, the most popular cryptocurrency, Bitcoin, trades at $32,209.50. Meanwhile, the second-largest cryptocurrency, Ethereum, stands at $1,919.00.