Investing.com - The U.S. dollar traded largely unchanged in early European trade Tuesday ahead of the latest inflation data that could determine the path of U.S. monetary policy, while sterling gained as U.K. workers continued to receive healthy wage increases.
At 03:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely flat at 105.516.
U.S. CPI to drive trading sentiment
Trading has been largely range bound Tuesday as traders warily await the release later in the session of the October U.S. consumer price index, a number that is likely to drive trading sentiment ahead of the December Federal Reserve meeting.
Analysts expect the yearly gain for the top line number to rise 3.3% from the prior year, a drop for 3.7% in September, while it is expected to rise 0.1% for the months below the 0.4% rise seen the prior month.
Several Fed officials, including Chairman Jerome Powell, have warned that sticky inflation could see the central bank hike rates even further, and any signs that prices are proving harder than expected to fall are likely to ramp up bets on more rate hikes by the U.S. central bank - a scenario that bodes well for the dollar.
U.K. wage growth remains strong
In Europe, GBP/USD rose 0.2% to 1.2296 after data released earlier Tuesday showed that British wages grew slightly less fast in the three months to September but remained close to their record pace.
Earnings excluding bonuses were 7.7% higher than a year earlier in the third quarter, a small drop from 7.9% the prior month, but still enough to cause the Bank of England concern as it tries to battle inflation still at elevated levels.
The unemployment rate remained at 4.2% in September, suggesting the U.K. labor market remained healthy even after a series of interest rate hikes.
EUR/USD rose 0.1% to 1.0707 ahead of the release of the latest quarterly eurozone growth numbers, which should illustrate the impact of the European Central Bank prolonged rate-hiking cycle.
Third-quarter eurozone GDP is expected to fall 0.1% on the quarter, a meager 0.1% rise on an annual basis.
That said, ECB President Christine Lagarde last week said that rates will stay restrictive at least for several quarters as inflation remains elevated.
Yen nears lowest level in three decades
In Asia, USD/JPY edged lower to 151.64, with the Japanese yen hovering around its weakest level in a year against the greenback, although further losses in the currency were stifled by Japanese authorities once again warning that they will intervene in foreign exchange markets.
The pair hit a one-year low of 151.92 on Monday, and a break below this level would mark a fresh 33-year low for the yen.
Japanese authorities in September last year intervened in the currency market to boost the yen for the first time since 1998.
USD/CNY rose 0.1% to 7.2942, with the yuan remaining weak after data showed a further slowdown in lending activity in the country through October.