Investing.com – The U.S. dollar strengthened on Wednesday, touching near two-month highs on expectations for moderate interest rate cuts by the Federal Reserve this year, while sterling fell on bland inflation data.

At 04:15 ET (08:15 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading 0.1% higher at 103,180, remaining close to Monday’s two-month high.

The dollar was helped by lower expectations for interest rate cuts

The latest data pointing to a resilient economy, combined with slightly higher-than-expected inflation in September, led market participants to moderate expectations for an aggressive cut in U.S. interest rates.

These expectations were joined to Tuesday’s comments by the president of the Atlanta Federal Reserve, who stated that this year, when updating his forecasts for the US central bank meeting, he had only made one more interest rate cut of 25 basis points.

Most market participants expect two more cuts totaling 50 basis points this year, and investors currently estimate a 92% chance of a 25 basis point cut when the Fed makes its next decision on November 7, with an 8% chance of no change. to CME Group’s (NASDAQ:) FedWatch tool

The pound sterling loses after the release of inflation information

In Europe, it fell 0.5% to 1.3003 after data showed British inflation fell more than expected in September, paving the way for a rate cut next month.

In the UK, the rate fell to 1.7% year-on-year, below forecasts of 1.9% and 2.2% recorded a month earlier.

This was the first time since April 2021 that it fell below the Bank of England’s 2% target, adding to data released earlier this week that showed British wages were growing at their slowest pace in over two years.

“The data is clearly dovish for the Bank of England and paves the way for interest rate cuts at the remaining two meetings this year (November and December),” ING analysts said in a note.

“Given Governor Andrew Bailey’s comments earlier this month suggesting the BoE may accelerate the pace of monetary easing, markets may be tempted to price in the chance of a 50 basis point rate cut in November.”

fell 0.1% to 1.0882 ahead of the European Central Bank’s policy-setting meeting on Thursday.

It has already cut rates twice this year, and this week’s cut in the deposit rate to 3.5% is almost fully priced in by financial markets.

“EUR/USD is mainly influenced by external factors. The significant decline in oil prices has narrowed the scope for further decline due to market factors, but we continue to suspect that pre-election sentiment in the US should favor a weaker EUR/USD rate,” ING said.

Yuan recovers weekly losses

fell slightly to 7.1179, with losses continuing for the yuan this week as sentiment deteriorates over the country’s plans for further stimulus.

China’s Ministry of Finance said it would introduce a series of fiscal measures to stimulate economic growth, but did not specify the timing or size of the planned measures, which raises uncertainty about their effectiveness.

rose 0.2% to 149.43 and the pair climbed closer to the 150 resistance level.

Data released later this week is expected to provide more clues about the Bank of Japan’s plans to raise interest rates further.