The dollar index fell 0.37% after weaker-than-expected ADP and GDP revisions followed Tuesday's sizeable JOLTS and consumer confidence drops, with the durability of the setback contingent on Thursday's core PCE and Friday's employment report.

The mid-week U.S. data are of far less importance to the Fed than its primary inflation and employment gauges.

But the misses sent EUR/USD to a two-week high, up 0.4% on Wednesday and up 1.63% from last week's August lows.

Wednesday's advance cleared the downtrend line across July and August highs, the 21- and 100-day moving averages and last week's 1.0930 high, only fading ahead of the 30-DMA at 1.0948 favored by trend followers and 61.8% of August's drop.

Two-year bund-Treasury yield spreads are also 26bp higher than the were last week.

The ECB remains favored to hike in September versus the Fed no longer being priced to hike again before commencing rate cuts by May.

Sterling rose 0.6%, also running into resistance by its 30-DMA at 1.2747.
The BoE is expected to do at least two more 25bp rate hikes to deal with UK inflation at 5.3% versus 3.2% in the U.S., or even the 4.2% forecast for July core PCE.
How the UK economy handles higher-for-longer rates is another question.

USD/JPY rose 0.2%, as the BoJ's negative rates and doubts about the bank abandoning ultra-easy policies over the near to medium-term greatly limit the appeal of the yen.

Treasury-JGB yield spreads fell from last week's peaks and prices look technically top-heavy, but the U.S. inflation, employment and ISM manufacturing reports on Thursday and Friday will determine if the uptrend resumes quickly or a correction ensues.

Aussie was flat and USD/CNH rose 0.24%, following below forecast Australian inflation and the latest efforts to revive China's property sector.

Thursday brings euro zone CPI, forecast at 5.1% from a year earlier versus July's 5.3% reading.
Then U.S. core PCE, seen up 0.2% for a second month, jobless claims and Chicago PMI.

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