Dollar Edges Higher; U.S. GDP Quarterly Data Due

The U.S. dollar edged higher in early European trade Thursday, but remained near a one-month low amid concerns aggressive tightening by the Federal Reserve may already be slowing economic growth.

At 3:05 AM ET (0705 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally higher to 102.095, still below the two-decade high above 105 seen in the middle of May.

The minutes from the early May Fed meeting, released Wednesday, indicated that the central bank policymakers will be sticking to a plan to raise rates by a half-percentage point at its next two meetings starting next month, largely as expected.

However, they also largely ruled out even more aggressive tightening while also creating the possibility of a pause in rate hikes, after the June and July increases, something that Atlanta Federal Reserve President Raphael Bostic suggested earlier in the week.

The scaling back of Fed tightening bets has followed slowing economic growth, with new home sales falling almost 17% last month and retailers reporting disappointing results as consumers scale back discretionary spending as the prices of essentials like food and petrol soar.

Attention later in the session will turn to the release of the first quarter U.S. GDP number, which is expected to show a drop of 1.3%, and weekly initial jobless claims data.

“We think that the downside potential for the dollar is shrinking, especially given a more balanced positioning after a widespread position squaring and a still supportive Fed story,” said analysts at ING, in a note.

EUR/USD fell 0.2% to 1.0664, with the single currency handing back some of earlier gains after European Central Bank President Christine Lagarde signaled an end to negative interest rates in the Eurozone in the third quarter.

GBP/USD fell 0.1% to 1.2558, USD/JPY dropped 0.1% to 127.22, while the risk-sensitive AUD/USD sank 0.3% to 0.7070. NZD/USD fell 0.3% to 0.6458, shedding most of the gains following Wednesday’s Reserve Bank of New Zealand meeting.

Elsewhere, USD/TRY rose 0.1% to 16.3788, with economists expecting the Turkish central bank to keep its benchmark interest rate unchanged at 14% at its policy-setting meeting later Thursday, even as inflation soared.

Russia’s central bank is also set to hold an extraordinary rate-setting meeting later Thursday, the day after the country’s consumer price index declined 0.02% after rising 0.05% in the previous week, according to data from statistics service Rosstat.

In annual terms, inflation slowed to 17.51% from 17.69% a week earlier, and this could help the central bank make the decision to lower its key interest rate from 14%.