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© Reuters.
By Peter Nurse
Investing.com - The U.S. dollar retreated in early European trade Tuesday ahead of the latest readout of U.S. consumer inflation, while the yen gained upon the nomination of the next governor of the Bank of Japan.
At 02:10 ET (07:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower at 103.028.
The dollar has traded in something of a holding pattern over the last few days as traders awaited the release of the latest U.S. consumer price index, which could provide further clues on the Federal Reserve's policy outlook.
The U.S. central bank earlier this month raised interest rates by 25 basis points, tempering the pace of its rate hikes, but the bank’s policymakers were keen to say that the fight against inflation continues and further increases should be expected.
Attention thus turns to today’s January inflation report, with the headline number expected to show that consumer prices rose at an annual pace of 6.2% in January, down from 6.5% in December and well below June's four-decade peak of 9.1%.
That said, markets are also wary of any potential bigger-than-expected surprises in core inflation, which excludes volatile energy and food prices, as the labor market remains strong, potentially powering wage growth.
Elsewhere, USD/JPY fell 0.3% to 132.04, following the nomination of Kazuo Ueda to be the next governor of the Bank of Japan.
Ueda, a former BOJ policy board member but currently an academic, was not seen as being anywhere close to the top job before speculation started swirling late last week.
Thus, he is seen as something of an outsider who is not necessarily committed to the central bank’s current ultra-easy policy.
That said, data released earlier Tuesday showed Japan's economy rebounded much less than expected in the fourth quarter, climbing 0.6% instead of the expected 2.0%, after falling a revised 1.0% in the July-September period.
EUR/USD traded 0.2% higher at 1.0737, ahead of the release of the latest iteration of growth data for the region.
The European Commission lifted its economic forecasts for the EU on Monday, saying the bloc will likely dodge a recession thanks in part to a dip in gas prices.
GBP/USD rose 0.2% to 1.2161, after the release of the latest U.K. labor data showed a drop of almost 13,000 in the claimant count in January, suggesting the labor market remains strong despite the country’s economic difficulties.
AUD/USD edged 0.1% higher to 0.6972, while USD/CNY fell 0.1% to 6.8158, with the yuan benefiting from the dollar's weakness.
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