Peter Nurse

Investing.com: The U.S. Dollar edged higher Wednesday morning, rebounding from overnight losses. Sterling was weaker after U.K. inflation rose in April.

The, which monitors the greenback against six other currencies at 3:50 am ET (0750 GMT), traded 0.1% lower at 103.550 after dropping as low as 103.18 Asia. This was its lowest level in almost two weeks.

The stock fell 0.2% from 1.0564 to 1.0522. It had risen 1.1% overnight. That was the largest percentage gain day since March. After a Tuesday 0.8% gain, it edged down to 0.7023.

It fell 0.1%, to 129.25. The safe-haven Japanese yen was also affected by the improvement in tone. However, it rose 0.1%, to 6.7450. Some gains were made after Shanghai had achieved the long-awaited milestone: three consecutive days of no COVID-19 new cases beyond quarantine areas.

The strong performance of the U.S. in April has helped to boost confidence in the stock market, so consumers seem to be able weather sharp price hikes.

“FX markets are calming a little after a riotous month. When the dust settles, however, we are still left with a Fed on course to tighten rates above 3% into next year and the commodity shock from the war in Ukraine,” said analysts at ING, in a note. “Commodity currencies could now enjoy something of a bounce-back, but expect the dollar to hold onto large parts of its gains.”

The index fell 0.3% to 1.2448 elsewhere, falling from levels above 1.25, following a 1.4% overnight rally. It was the lowest level since late 2020.

Inflation in Britain rose to the highest point in over 40 years. Data released Wednesday showed that it increased 9% year-to-year. This puts pressure on the Bank of England to take action.

The central bank raised its policy setting to 1% in its most recent meeting. Its fourth successive increase. Given the rise in inflation, it is likely that they will continue to tighten monetary policy despite mounting risks of recession.

Later in the session, the equivalent CPI data for the Eurozone will be released. It is anticipated to show an annual CPI of 7.5% in April with the rising 0.6%.

While the European Central Bank has not been quick to adjust monetary policy to meet inflationary threats, expectations are rising that it will soon raise its interest rate.

European Central Bank Governing Council Member – Tuesday was the first official from Eurozone to propose a half-point interest-rate hike if inflation threats worsen. He currently supports a quarter of a point increase in July.

The Netherlands governor is one of the ECB’s most hawkish policymakers, but his comments do suggest the hawks are winning the policy-tightening debate.