At 04:30 ET (09:30 GMT) Wednesday, the Dollar Index - which measures the greenback against a basket of six other currencies - was trading 0.1% higher at 97.180, extending its gains after a two-day rise.
Dollar drifts up ahead of Fed minutes
Market participants pushed the U.S. dollar a touch higher this week, buoyed by a string of upbeat U.S. economic indicators, including last week’s jobs report. Analysts said the currency’s modest advance also reflects an unsettled geopolitical backdrop that has kept investors attentive to safe-haven flows.
Analysts at ING noted that recent data point to continued momentum in the near term.
“That trend is expected to continue today on the back of some constructive durable goods orders and industrial production data,”
On the diplomatic front, officials said Iran and the U.S. found common ground on the main "guiding principles" during the second round of indirect talks over their nuclear dispute held on Tuesday. Separately, negotiators from Ukraine and Russia wrapped up the first of two days of U.S.-mediated discussions in Geneva.
All eyes are on the minutes of the Federal Reserve’s January meeting, due later in the session. The Fed earlier left interest rates unchanged while cautioning that risks to both inflation and the labour market persist.
ING also commented on the Fed outlook, flagging potential implications for market expectations.
“A firm consensus around a pause should be evident,” ING said, “that could rein in current expectations of around 59bp of Federal Reserve easing this year,”“The uncertainty here stems from the likely arrival of Kevin Warsh as Fed Chair in May and how he will steer the central bank. Here, the market is on the lookout for any dates of confirmation hearings, which will be seen as a dollar negative event risk.”
Sterling edges higher despite inflation cooling
In Europe, the GBP/USD pair rose 0.1% to 1.3570. The marginal advance came even as official data showed U.K. consumer prices slowed to an annual rate of 3.0% in January, down from 3.4% in December. The slowdown reflected weaker increases in transport, food and non-alcoholic beverage prices.
ING described the January inflation report as mixed.
‘It’s a bit of a mixed bag on U.K. inflation this morning. Food inflation is down sharply. That should be good news for the hawks, who worried that elevated food inflation would spark a more persistent, wider bout of inflation. But services inflation is stickier – and importantly, the BoE’s core services metric is up slightly,” said ING.
The euro traded lower against the dollar, with EUR/USD down 0.1% to 1.1836. The move followed a report in the Financial Times that European Central Bank President Christine Lagarde plans to leave her post early, ahead of next year’s French presidential election. Lagarde’s term is scheduled to end in October 2027.
ING said attention may shift to possible successors, naming Spain’s Pablo Hernandez de Cos and Germany’s Joachim Nagel as leading candidates, and noting that it is early for this development to have a material impact on the euro.
Yen and Asian-linked moves
In Asia, USD/JPY ticked 0.2% higher to 153.66 after Japan reported a 16.8% year-on-year jump in exports for January while imports fell, producing a smaller-than-expected trade deficit of ¥1.15 trillion.
Meanwhile, the U.S. and Japan announced initial details of Japan’s $550 billion commitment to invest in the United States. The first transaction disclosed under that initiative is a $33 billion investment in a natural gas production facility in Ohio, to be managed by a subsidiary of Softbank.
ING commented that direct Japanese investment into the U.S. will be a key variable for USD/JPY dynamics this year, adding to a mixed outlook for the pair.
Other currency moves
USD/CNY was largely unchanged at 6.9087, hovering near three-year lows as Chinese markets remain closed for the rest of the week. AUD/USD dipped 0.2% to 0.7071.
NZD/USD fell 0.7% to 0.6003 after the Reserve Bank of New Zealand left its official cash rate at 2.25% and signalled policy will remain supportive while inflation returns to target. The RBNZ said it expects price growth to move toward the 2% midpoint over the next year amid spare capacity and modest wage pressures.
Market implications and close
Traders will parse the Fed minutes for more detail on the committee’s assessment of incoming data and the balance of risks to inflation and the labour market. Until then, currency moves are likely to remain reactive to regional economic prints, central bank commentary and geopolitical developments. The mix of constructive U.S. data, uneven global inflation readings, and bilateral investment announcements contributed to a cautious but data-driven tone across FX markets on Wednesday.
Below are the main currency levels and notable datapoints referenced during the session:
- Dollar Index: 97.180, up 0.1%
- GBP/USD: 1.3570, up 0.1%
- EUR/USD: 1.1836, down 0.1%
- USD/JPY: 153.66, up 0.2%
- USD/CNY: 6.9087, largely unchanged
- AUD/USD: 0.7071, down 0.2%
- NZD/USD: 0.6003, down 0.7%
- Japan exports: +16.8% year-on-year in January
- Japan trade deficit: ¥1.15 trillion, smaller than expected
- UK CPI: 3.0% year-on-year in January, down from 3.4% in December
- RBNZ official cash rate: 2.25%
- Planned Japanese investment commitment to the U.S.: $550 billion; first disclosed deal: $33 billion in Ohio