The U.S. dollar also rose 0.1% against the Canadian dollar to C$1.3861, extending gains into a third consecutive day after Ottawa announced retaliatory tariffs on about $20 billion of U.S. annual imports on Tuesday and rolled out support for businesses and workers after trade talks with Washington collapsed last week.
Traders focus on PCE inflation and Fed Chair speech
Traders were focused on the release of July U.S. personal consumption expenditures (PCE) data later in the day, ahead of Federal Reserve Chair Kevin Warsh’s keynote speech at Jackson Hole on Friday.
The conference, with its global audience and intense media coverage, offers Fed officials a high-profile platform to signal policy thinking or reinforce existing messages.
PCE is the Fed's preferred inflation gauge. Economists polled by Reuters expect core PCE, which excludes food and energy, to have risen 3.3% in July from a year earlier, unchanged from June and well above the Fed's 2% target.
If forecasts prove correct, traders will look for clues from Warsh on whether further rate hikes may be needed to bring inflation back to target. Some analysts say the recent rise in long-dated Treasury yields suggests the Fed may need to do more.
Treasury Secretary Scott Bessent's decision to intervene in the market in a bid to lower bond yields has added another layer of complexity.
"Treasury’s recent decision to step up long-dated buybacks is revealing. It says to me that U.S. officials are uncomfortable with higher long-term yields. If Warsh at all shares that view then the more likely outcome is a speech that errs on the hawkish side," said Benjamin Jones, global head of research at Invesco.
However, he added: "With the Fed divided, another inflation print before the next meeting, and Warsh having made clear that he is uncomfortable with conventional forward guidance, the most likely outcome is that he repeats what we’ve seen at the last two policy meetings.
"That is to say he won’t say much of substance on near-term policy."
Major currency moves stay muted ahead of Jackson Hole
Aside from the Swiss franc, against which the dollar rose 0.3% to 0.8036 francs, moves in the most traded currency pairs were muted ahead of a potentially pivotal few days for markets.
The dollar climbed 0.1% against the Japanese yen to 158.95 yen, while sterling slipped 0.15% to $1.3633.
The euro was little changed at $1.1671, shrugging off a Reuters report citing sources saying ECB policymakers are prepared to raise interest rates at their September meeting but have little appetite to signal further tightening.
Dollar edges higher as markets await U.S. inflation data
The dollar edged higher but remained range-bound against major peers on Wednesday as investors awaited U.S. inflation data that could set the tone ahead of the Jackson Hole symposium of central bankers later this week.
The biggest mover was the Australian dollar, which hit $0.71865, its highest level in three months, after data showed the trimmed mean CPI gauge, the Reserve Bank of Australia's preferred measure of cost-of-living pressures, rose at a faster-than-expected annual rate of 3.6%.
It was last up 0.22%, just below that level.
"With underlying inflation showing no signs of slowing, there’s still a risk that the RBA will deliver another rate hike over the coming months," Capital Economics analysts wrote in a research note.
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