The U.S. dollar traded largely sideways during early Asian trading on Wednesday as investors waited for key U.S. inflation data to gain further insight into the Federal Reserve’s next policy move.

The U.S. Dollar Index edged up 0.1% to 99.858, while major currencies showed limited movement.

FX Markets Lack Clear Direction

In the foreign exchange market:

• USD/JPY traded around 159.335

• EUR/USD held at 1.1537

• GBP/USD remained steady at 1.3503

• AUD/USD was flat near 0.7064

• NZD/USD slipped 0.1% to 0.5876

The Japanese yen remained near its weakest level of the month despite the recent coordinated intervention by U.S. and Japanese authorities to support the currency.

U.S. CPI Becomes the Main Focus

The U.S. inflation report due later on Wednesday is the key event shaping interest-rate expectations.

Following last week’s weaker-than-expected employment report, markets remain divided over the Federal Reserve’s next move.

According to the CME FedWatch Tool:

• 52% probability that the Fed will keep rates unchanged at its meeting ending September 16

• 48% probability of a 25-basis-point rate increase

If CPI shows further signs of cooling inflation, expectations for tighter monetary policy could decline and put additional pressure on the U.S. dollar.

Oil Rises as Middle East Tensions Continue

Brent crude rose 0.8% to $89.61 per barrel following renewed attacks on shipping routes in the Middle East.

Higher energy prices could complicate the inflation outlook, as rising oil costs may slow the pace of disinflation.

Fed Remains Cautious About Inflation

Chicago Fed President Austan Goolsbee said the central bank remains more concerned about inflation being too high than about weakness in the labor market.

This suggests that the Fed may remain cautious until it receives clearer evidence from incoming economic data.

Conclusion

The U.S. dollar remains without a clear direction as markets await the latest U.S. CPI report to reassess expectations for Federal Reserve policy.

In the short term, inflation data, oil prices, and developments around the Strait of Hormuz will remain key factors influencing the U.S. dollar and broader foreign exchange markets.

This article is intended solely to share market information and analysis. It does not constitute investment advice.

Source: Reuters