Dollar Stabilizes, Pound Retreats

The U.S. dollar stabilized in early European trading on Friday after the release of another hot U.S. inflation figure, while sterling retreated from sharp overnight gains amid speculation that the U.K. government is preparing to withdraw plans for massive unfunded tax cuts.

At 03:10 ET (07:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% to 112.350, stabilizing after a 0.5% drop in the overnight session. Sharp gains in global equity markets boosted risk sentiment as investors shrugged off data showing US consumer prices rose more than expected in September. The US currency rallied as rising inflation, recession fears and concerns over central bank policies around the world hit risk appetite. According to Citigroup, the dollar will continue to rise until the current slowdown in the global economy ends and growth starts to accelerate again. "What we think is required for a top in the dollar is a bottom in global growth," bank analysts said. "There needs to be a narrative shift to change the dollar's trajectory." Elsewhere, GBP/USD fell 0.2% to 1.1303 after rising sharply overnight on reports of a possible U-turn on the UK government's heavily unfunded tax plans. Finance Minister Kwasi Kwarteng cut short a visit to Washington late Thursday on reports that Prime Minister Liz Truss' government was considering further backtracking on its controversial "mini-budget". The UK bond market and sterling were hit hard by plans to finance massive taxes with borrowing, resulting in the Bank of England stepping in to restore calm by announcing an emergency bond-buying program that will expire on Friday. The EUR/USD pair was flat at 0.9773 after Germany's wholesale price index rose by 19.9% yoy and 1.6% mom in September, driven by higher costs of raw materials and intermediates. This came after data released on Thursday showed that the country's consumer inflation data rose 10.9% year-on-year compared to other European countries, putting more pressure on the European Central Bank to continue raising interest rates. Source: investing.com Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!