SINGAPORE- The dollar sank to a two-month low against its major peers on Wednesday in the lead-up to a key US inflation reading, while sterling scaled a 15-month top on expectations the Bank of England (BoE) has further to go in raising rates.
US inflation data is due later on Wednesday, with expectations core consumer prices rose 5 percent on an annual basis in June. The figures should also provide further clarity on the Federal Reserve’s progress in its fight against inflation.
Ahead of the release, the US dollar fell to a two-month low of 101.45 against a basket of currencies extending its losses from the start of the week after Fed officials said the central bank was nearing the end of its current monetary policy tightening cycle.
The euro rose 0.07 percent to $1.1018, flirting near Tuesday’s two-month high of $1.1027.
“We’re already seeing markets move in anticipation of a softer US inflation report,” said Matt Simpson, senior market analyst at City Index. “That runs the risk of a ‘buy the rumor, sell the fact’ reaction if the figures come in around expectations.”
Elsewhere, sterling peaked at a 15-month high of $1.2940 in early Asia trade, bolstered by bets the BoE will have to tighten monetary policy further to tame British inflation that is running at the highest rate of any major economy.
Data out on Tuesday showed that a key measure of British wages rose at the joint fastest pace on record as basic earnings in the three months to May surged 7.3 percent, higher than expectations of a 7.1 percent rise.
“The (BoE) will have their heads in their hands following the latest employment and wages figures, as it likely forces them to hike by another 50 basis points (bps) at their next meeting and have a terminal rate above 6 percent,” Simpson said.
