Dollar slips, euro above parity before U.S. inflation data

LONDON (July 13) - The euro edged higher on Wednesday, hovering just above parity with the U.S. dollar on Wednesday while traders focused on U.S. data due later in the session that is expected to show inflation at a 40-year high.

European stock markets were in the red and the dollar index was down 0.2% on the day at $107.93 at 1047 GMT .

The euro was up 0.2% on the day at $1.00595.

On Tuesday, the euro had dropped as low as $1.00005 on the most widely used Electronic Broking Services' (EBS) dealing platform and it touched $1 on Reuters dealing overnight.

Market-watchers were focused on U.S. CPI data due later in the session. Economists forecast headline U.S. inflation accelerated to 8.8% year-on-year in June, a four-decade high.

But "core" CPI, which strips away volatile food and energy prices, is expected to repeat May's 0.6% monthly increase and cool slightly to 5.7% year-on-year.

Higher-than-forecast inflation would reinforce expectations of Federal Reserve interest rate hikes and push the dollar higher - potentially causing euro-dollar to break parity, analysts said.

But traders will be looking for any signs of inflation having peaked as this could potentially convince the U.S. central bank not to become more aggressive in its future rate hikes. read more

The euro is down nearly 12% this year and fell to a 20-year low on Tuesday as the war in Ukraine has triggered an energy crisis that has hurt the continent's growth outlook.

Germany has moved to stage two of a three-tier emergency gas plan and warned of a recession if Russian gas flows are halted. read more

REUTERS