Dollar steady, pound up after inflation climbs

[NEW YORK] The dollar was largely steady against most major rivals on Tuesday except for the pound, which firmed after British inflation data supported expectations of a Bank of England interest rate hike.

"The trading this week is much more technically based than fundamentally based" for the euro and the dollar, said Boris Schlossberg of BK Asset Management.

Not only was the market absent a number of traders during the summer holiday peak, but there were few US and European indicators to give direction, except for a rise in US housing starts in July and the British inflation report.

"Tomorrow obviously is going to the big day of the week with the FOMC minutes and perhaps we'll get some movement after that," Mr Schlossberg said.

The Federal Open Market Committee has kept the benchmark federal funds rate near zero since late 2008 to support the economy's recovery from the severe 2008-2009 recession. The minutes of the FOMC's July meeting were scheduled for release Wednesday at 1800 GMT.

The minutes could give insight into the timing of the interest rate increase planned for this year, perhaps as early as September.

The pound, meanwhile, advanced after official data showed that Britain's annual inflation rate rose to 0.1 per cent in July from zero in June.

"Markets rewarded the pound with a pop to its highest in nearly seven weeks after a surprise uptick in UK inflation bolstered views that Britain was among a sparse global community contemplating higher interest rates," said Joe Manimbo of Western Union Business Solutions.

AFP