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Dollar Edges Up Ahead of Key Data and Bank of Canada Policy Meeting

The dollar stabilized on Wednesday, anticipating crucial U.S. economic data releases and a monetary policy meeting in Canada that traders speculate could trigger rate cuts among major economies worldwide.

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U.S. Economic Data and Rate Cut Speculations

Investors are eagerly awaiting U.S. services data on Wednesday, followed by additional job figures later in the week. The greenback has hovered near a two-month low following signs of a softening U.S. economy on Monday, bolstering expectations for earlier interest rate cuts by the Federal Reserve.

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Meanwhile, the Bank of Canada’s meeting precedes a European Central Bank meeting on Thursday. Market projections suggest a 75% likelihood of a Canadian rate cut and a 95% chance of a cut in Europe.

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Currency Outlook

The Canadian dollar and the euro remained within their respective trading ranges ahead of these meetings, with market attention focused on both the decision and the outlook for future policy moves.

“The outlook for more cuts this year could significantly weaken the Canadian dollar,” noted Commonwealth Bank of Australia strategist Joe Capurso.

The U.S. dollar index rose by 0.11% to 104.92 on Wednesday, recovering from Tuesday’s low of 103.99, its lowest level since April 9.

Brent Crude Futures and Global Inflation Concerns

Investors closely monitored Brent crude futures, which lingered near four-month lows. Thierry Wizman, global forex strategist at Macquarie, emphasized that persistent low oil prices could lead to global disinflation, potentially impacting policy decisions and the strength of the dollar.

Market Performance and Currency Movements

The yen declined approximately 0.6% to 155.90 per dollar, retracing Tuesday’s gains driven by investors adjusting positions in emerging markets.

The Australian and New Zealand dollars experienced minor gains after domestic economic reports were less dire than anticipated.

Emerging markets stabilized after recent turbulence. The Mexican peso steadied following significant declines against the dollar and the yen, prompted by election results indicating potential shifts in political dynamics.

India’s rupee dropped after recovering from a seven-week low, reflecting market concerns about election outcomes and political stability.

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