US Dollar Trades Flat in Early European Session

The US dollar is trading almost flat as the European session gets underway. Investors are in wait-and-see mode ahead of the release of American inflation data for October later today. In terms of the currency markets, this event will be critical in the economic calendar and will likely impact the direction of dollar trading in the coming weeks. Senior Fed officials have been working hard at every public speaking opportunity to halt the market's growing perception that the current hiking cycle has finished and that a cut may come sooner than expected. The tight monetary conditions of the last few months, with yields touching historic highs, kept the greenback supported and helped in the fight against inflation, so it's no surprise that Jerome Powell and his peers want to talk down any excessive optimism. However, today's inflation numbers will be key in shaping market expectations. A headline reading below the expected 3.3% could overrule the Fed's rhetoric and break the impasse for dollar traders, shifting dollar risk to the downside.

Ricardo Evangelista – Senior Analyst, ActivTrades