Dollar Strengthens Ahead of Fed Minutes; Euro Declines

The U.S. dollar saw a slight increase on Wednesday as expectations build regarding the interest rate outlook in the United States, while the euro experienced a decline.

As of 04:10 ET (08:10 GMT), the Dollar Index, which measures the dollar against a basket of six other currencies, was up 0.1% at 102.387—close to last Friday’s seven-week peak of 102.69.

### Dollar Awaits Fed Minutes

The dollar’s demand has surged since Friday’s robust payroll report, which led the market to largely discount the possibility of a 50 basis point rate cut in November, shifting focus instead to a more conventional 25 basis point reduction.

Current estimates suggest an approximately 85% likelihood of a quarter-point cut, alongside a slim chance that the Federal Reserve will opt to keep rates steady, as indicated by market tools.

Investors are now looking ahead to the release of the minutes from the Fed’s September meeting, expected later in the day. During that meeting, the central bank opted for a significant 50 basis point cut, and the minutes are anticipated to shed light on the reasoning behind that decision. However, given the recent public remarks by Fed officials, the release may not provide substantial new insights.

The consumer price index for September is also set to be published on Thursday and will likely influence the Fed’s outlook moving forward.

### Euro Slips Ahead of ECB Meeting

In the European market, the euro fell 0.2% to 1.0962 against the U.S. dollar, despite the release of positive German trade figures for August, which ignited hopes for a rebound in Europe’s largest economy. Official data indicated that German exports rose by 1.3% month-over-month, surpassing expectations of a 1.0% decline.

The European Central Bank is scheduled to meet next week, with expectations for another policy easing. The bank has already implemented two rate cuts this year due to waning economic growth and easing inflationary pressures. An ECB policymaker indicated that further cuts are likely, with the pace depending on developments in the fight against inflation.

The British pound also recorded a slight drop, falling 0.2% to 1.3081, not far from its three-week low of 1.3059 reached on Monday. Analysts noted heightened speculation in the UK press regarding the upcoming budget presentation by Chancellor Rachel Reeves on October 30, with investors closely monitoring potential concerns in the UK Gilt market regarding government spending plans.

### Kiwi Falls After Rate Cut

The New Zealand dollar experienced a notable drop, falling 0.9% to 0.6085, reaching its lowest point since August 19. This decline followed the Reserve Bank of New Zealand’s decision to cut interest rates by 50 basis points and hint at the possibility of further aggressive monetary easing.

The Japanese yen, meanwhile, rose 0.2% to 148.53, having reached a seven-week high of 149.10 on Monday. The yen is expected to face increased volatility in the coming weeks, particularly with Japan’s election scheduled for October 27, alongside the Bank of Japan’s monetary policy meeting.

The Chinese yuan also saw a modest increase, rising 0.1% to 7.0643 against the dollar, following a 0.6% surge in the previous session as onshore trading resumed after the Golden Week holiday.