Dollar Steadies Near Multi-Month Lows; Fed Minutes Loom

The dollar edged marginally lower in early European trade Wednesday, remaining near multi-month lows ahead of the release of the eagerly-awaited minutes from the last U.S. Federal Reserve meeting.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 89.683, close to the lowest since late February.

EUR/USD traded 0.2% higher at 1.2245, climbing to its highest level since early January, USD/JPY was 0.1% lower at 108.95, while the risk-sensitive AUD/USD was flat at 0.7792.

The minutes from the Fed’s most recent meeting are due later on Wednesday, and are expected to confirm that policymakers think the U.S. economy still needs support. As such, the reining in of the central bank’s ultra-easy monetary policies will remain in the distance.

This is likely to keep the dollar on the backfoot despite last week’s gains when U.S. consumer prices posted the fastest increase in more than a decade.

“It is now as if history from the early 2000s is repeating itself; the days of the ‘Greenspan put’ when the Fed maintained a stimulative monetary policy, finding a weakness in individual economic indicators and ignoring the overall acceleration in the economy and inflation,” said Alexander Kuptsikevich at FXPro, in a note.

Elsewhere, GBP/USD was largely unchanged at 1.4183, near its strongest level since late February, benefitting from the reopening of the U.K. economy as a result of a successful vaccination program.

British consumer price inflation rose to 1.5% in April from 0.7% in March, official figures showed on Wednesday, ahead of the expected rise of 1.4%. There was a more notable rise in U.K. producer price inflation, with input prices rising nearly 10% on the year.

USD/CAD fell 0.1% to $1.2058, close to its weakest level since May 2015. Canadian inflation data are due later in the day, as are Eurozone numbers.

“Supported crude is pairing with accelerating vaccinations in Canada to keep pressuring on USD/CAD, which may test the key 1.2000 support in the coming days,” said ING analysts, in a note.

EUR/HUF gained 0.3% to 351.38, with the forint handing back some of Tuesday’s gains on the back of officials at Hungary’s central bank suggesting a hike in the benchmark rate could be coming in June.

“We now look for four 15bp hikes in the 1-week depo this year, with the first hike coming at the June NBH meeting,” added ING. “The proactive NBH points to near-term gains for the forint and outperformance. We expect EUR/HUF to test and break the 350 level this quarter. But forint gains won’t be permanent and we expect EUR/HUF to end the year closer to 355-360 as a lot is already priced in.”

USD/RUB fell 0.1% at 73.6173, helped by Axios reporting that the U.S. administration is set to waive previously imposed sanctions on the company overseeing construction of the Nord Stream 2 pipeline, easing pressure on the Russian government.