The dollar advanced against several major currencies on Wednesday, as results so far for the midterm elections showed little evidence of a "red wave" resounding Republican victory that some expected, leaving investors to focus on upcoming inflation data.
A stronger showing by Republicans may have backed the idea of less fiscal support and potentially a lower peak in the Fed's terminal rate which would have been dollar negative, said Joe Manimbo, senior market analyst at Convera in Washington.
"Markets are now in the process of turning the page on politics and bracing for the inflation report tomorrow," Manimbo said.
Investors are waiting to see whether Thursday's U.S. Consumer Price Index data will spur the Federal Reserve to continue to increase interest rates well into next year in a bid to curtail inflation, or whether they might be able to ease policy tightening.
The dollar has retreated from multi-decade highs in recent weeks as investors take profits following a months-long rally and as speculation grows that the Fed may be inching closer to pulling the curtain on its dollar-supporting interest rate hikes.
"The inflation report could be a good litmus test to gauge whether dollar sentiment has materially softened," Manimbo said.
The euro
EURUSD
was 0.3% lower against the dollar at $1.004, while the greenback was up 0.34% against the yen.
USDJPY
A stronger showing by Republicans may have backed the idea of less fiscal support and potentially a lower peak in the Fed's terminal rate which would have been dollar negative, said Joe Manimbo, senior market analyst at Convera in Washington.
"Markets are now in the process of turning the page on politics and bracing for the inflation report tomorrow," Manimbo said.
Investors are waiting to see whether Thursday's U.S. Consumer Price Index data will spur the Federal Reserve to continue to increase interest rates well into next year in a bid to curtail inflation, or whether they might be able to ease policy tightening.
The dollar has retreated from multi-decade highs in recent weeks as investors take profits following a months-long rally and as speculation grows that the Fed may be inching closer to pulling the curtain on its dollar-supporting interest rate hikes.
"The inflation report could be a good litmus test to gauge whether dollar sentiment has materially softened," Manimbo said.
The euro
EURUSD
was 0.3% lower against the dollar at $1.004, while the greenback was up 0.34% against the yen.
USDJPY