The euro is struggling to recover from Tuesday’s selloff after both headline and core US inflation came in hotter than expected, lifting the dollar and reinforcing expectations for a December Fed rate hike. Hawkish remarks from Fed officials added to the pressure, with Governor Christopher Waller raising the possibility of a half-point move and Anna Paulson and Lorie Logan signaling a willingness to tighten more aggressively if needed. Hopes for a diplomatic breakthrough between the US and Iran have tempered safe-haven demand for the dollar, helping steady EURUSD as traders turn to Germany’s final inflation reading and remarks from ECB President Christine Lagarde and Executive Board member Piero Cipollone.

Sterling has found some buying interest after Tuesday’s selloff, but a firmer US dollar is keeping the rebound in check. Hotter-than-expected US inflation reinforced expectations for a December Fed hike and led traders to price in some chance of a half-point move. The Bank of England’s hawkish stance continues to lend the pound some support, while hopes for progress in US–Iran diplomacy have tempered safe-haven demand for the dollar.

The yen remains under pressure as firmer-than-expected US headline and core inflation reinforced expectations for a December Fed rate hike, with markets now pricing in roughly a 90% chance. Fed’s Goolsbee added to the hawkish tone by flagging persistent services inflation, helping keep the dollar bid even as easing US-Iran tensions tempered safe-haven demand. In Japan, the BoJ’s October summary of opinions showed some policymakers favoring faster rate hikes as underlying inflation reached the bank’s 2% target, while others urged caution given weak household spending and uncertainty over the durability of AI-related demand. That leaves a December BoJ hike in play, while a modest narrowing in the US-Japan 10-year yield gap has helped limit the yen’s losses.

The Australian dollar edged higher in Wednesday’s Asian trade after slipping below 0.6900 on Tuesday, but hotter-than-expected US inflation continues to support the greenback. Core CPI rose 0.3% on the month, above expectations and at the level Fed Governor Christopher Waller said would lead him to favor a 50-basis-point hike. A quarter-point increase remains the market’s base case for December, though traders are assigning some risk to a larger move. At home, Australian consumer confidence fell to a four-year low in November, suggesting the RBA’s rate hikes are weighing on households and leaving the Aussie with little domestic support.