U.S. inflation data stays unchanged as markets wait for Fed chair

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U.S. inflation data stays unchanged as markets wait for Fed chair

Kiwi holds most of its gains on RBNZ increase speculation

The euro held steady against the dollar on Tuesday and most currency pairs were little changed as traders waited for U.S. inflation data later in the week and more clues from central bank governors over the direction of interest rates.

After central banks sought to push back against rising rate increase expectations last week, pound and euro settled back into another spell of low volatility.

The dollar index was not changed on the day, and the euro stood at $1.1581, unchanged on the day.

Adam Cole, currency analyst at RBC Capital Markets, remains constructive on the dollar. The story is based on a purely vanilla nominal rates story that shows his prediction that the disagreements with the U.S. would soon shrink, supporting the dollar.

He said that we will get better direction when we get to the U.S. CPI.

The data shows that the U.S. consumer price galloped, and Chinese factory gate prices soared in October.

A slew of central bankers are scheduled to speak later on Tuesday ahead of the inflation data, including European Central Bank President Christine Lagarde at 1300 GMT and Fed Chair Jerome Powell at 1400 GMT.

Standard Chartered strategists John Davies and Steve Englander said on a research note this week that they were expecting a rate increase from the Fed in 2022, down from a previous expectation of no hikes. The dollar is not changing their forecasts as the market pricing for future rate goes too aggressive. In other areas, the yen rose to a one-month high of 112.73 against the dollar, after hitting a four-year low last month. The dollar was down 0.2% on the day, leaving the euro down 0.2% on the day.

Sterling, hammered last week after the Bank of England's surprise decision to keep rates on hold, edged up 1% to $1.3577, recovering from the $1.3425 low hit on Friday.

The New Zealand dollar dropped 1% to a new number of dollars after jumping on Monday. It has drawing support from traders concerned that the Reserve Bank of New Zealand could raise rates by as much as 50 basis points bps later this month.

The risk-sensitive Australian dollar dropped by 0.2% to trade at $0.7407.

In the trading hours, it reached a record $68,564, pulling ether with a record $4,800 in Asian trading hours before going back to $67,615.