Dollar gains on U.S. CPI report, ECB stimulus expectations

Investing.com - Investing.com - The dollar traded largely higher against most major currencies on Wednesday after U.S. inflation data met consensus forecasts, while expectations for the European Central Bank to loosen policy supported the unit further.

In U.S. trading on Wednesday, EUR/USD was down 0.61% at 1.2638.

The Labor Department reported earlier that the U.S. consumer price index rose 0.1% in September, meeting estimates and following a 0.2% decline in August, which sent investors flocking to the greenback.

Year-over-year, consumer prices rose 1.7% in September, beating expectations for a 1.6% reading.

Core consumer prices, which exclude food and energy costs, rose 0.1% in September, disappointing expectations for a 0.2% gain. Core consumer prices were flat in August, though the overall report confirmed market expectations for the Federal Reserve to make monetary policy less accommodating going forward.

The euro, meanwhile, continued to come under pressure after Reuters reported earlier this week that the European Central Bank may purchase corporate debt to boost slowing inflation rates in the euro area and kick start recovery.

The report said the bank could activate the new stimulus plan as soon as December and begin bond purchases by early next year.

The ECB began purchasing covered bonds on Monday in a bid to increase liquidity in the region, and talk of fresh stimulus programs softened the euro.

An ECB spokesperson said no decision had been taken but the report was seen as an indication that the bank is moving closer to purchasing government debt.

Reports by Spanish news agency Efe that at least 11 European banks are set to fail ECB stress tests this weekend also hit demand for the euro.

The ECB was to announce the results of stress tests on 130 banks on Sunday.

The dollar was up against the yen, with USD/JPY down 0.18% at 107.19, and up against the Swiss franc, with USD/CHF up 0.53% at 0.9540.

The greenback was up against the pound, with GBP/USD down 0.41% at 1.6049.

The minutes of the Bank of England's October policy meeting released earlier revealed that members voted unanimously to keep the asset purchase facility program on hold.

However, members Martin Weale and Ian McCafferty voted for the third consecutive time to raise interest rates to 0.75% from a record-low 0.5%.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.19% at 1.1243, AUD/USD down 0.03% at 0.8775 and NZD/USD down 0.45% at 0.7926.

In Canada earlier, a gunman killed a Canadian soldier before attempting to storm Parliament, which spooked markets.

Authorities shot and killed the gunman, though it was unclear if there more suspects on the loose at the time of writing.

Elsewhere, the Bank of Canada left its overnight cash rate unchanged at 1%, adding that domestic growth remains reliant on 'exceptional policy stimulus' and that 'persistent headwinds continue to buffet most economies'.

The statement came after Statistics Canada reported that retail sales fell 0.3% in August, compared to expectations for a 0.2% gain, after a 0.1% dip the previous month.

Core retail sales, which exclude automobiles, slipped 0.3% in August, confounding expectations for a 0.3% rise. July's figure was revised to a 0.5% decline from a previously estimated 0.6% drop.

The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.47% at 85.85.

On Thursday, the U.S. is to publish its weekly report on initial jobless claims.

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