Investing.com – The US dollar fell on Wednesday, consolidating against its main competitors ahead of the release of key US inflation data later in the session.

At 04:45 ET (09:45 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.4% lower at 106,500, a further decline from last week’s two-year high.

Dollar consolidates ahead of PCE data

Currency traders appear to be taking dollar gains ahead of the October price index’s release later in the session, ahead of the close of U.S. markets on the Thursday before Thanksgiving.

The U.S. safe-haven currency received support from President-elect Donald Trump, who threatened to impose tariffs on Canada, Mexico and China, reigniting fears of a global trade war with dire consequences for global economic growth.

The measures are also widely seen as potentially inflationary for the U.S. economy, which could prevent the Federal Reserve from significantly cutting interest rates.

“The highlight of today’s session will be the publication of the October core PCE deflator in the US, expected at 0.3% m/m,” ING analysts said in a note.

“Even though the market has largely moved away from the U.S. inflation story, the volatile reading will deepen doubts about whether the Fed needs to cut rates in December after all. Expect the dollar to largely maintain recent gains, although end-of-month selling remains a risk.”

Euro under pressure from impoverished economic prospects

In Europe, it gained 0.3% to 1.0514, helped by a weakening dollar during the session, but the single currency remains under pressure due to the delicate economic outlook in Europe.

Data released earlier on Wednesday showed the French index fell in November on growing concerns about unemployment among households.

The monthly sentiment survey published by INSEE showed that the sentiment index fell to 90 from a revised reading of 93 in October.

The European Central Bank has already cut interest rates three times this year and is widely expected to cut interest rates again in December.

it rose 0.3% to 1.2607, moving away from last week’s six-week low.

“With a weekly deposit rate of 4.75%, the highest in the G10, sterling may generate some inflows as the market decides on the speed and scale of Trump’s policy agenda,” ING said.

“Additionally, the Bank of England’s interest rate profile continues to be closer to the Fed than to the ECB, suggesting sterling should outperform against the euro.”

The yen benefits from unthreatening haven bets.

fell 1% to 151.58, with the Japanese yen supported by safe-haven offers as well as rising expectations of a December interest rate hike in Japan.

fell slightly to 7.2505 but remained near a four-month high amid concerns that Trump’s potential tariffs would hit the already weakened Chinese economy.

rose 0.9% to 0.5889, rebounding from multi-month lows after the country’s central bank cut interest rates by 50 basis points and signaled further easing early next year, citing delicate economic activity in the country and easing pressure inflation.