The British pound edged lower on Wednesday after UK inflation data for October came in broadly in line with expectations, reinforcing speculation that the Bank of England may cut interest rates next month, while the U.S. dollar strengthened ahead of Nvidias earnings and key American data releases.

At the same time, the Japanese yen touched a ten-month low against the dollar following Bank of Japan Governor Kazuo Uedas meeting with key ministers, including Finance Minister Satsuki Katayama, who said the government is monitoring markets with a high degree of vigilance.

Official data released Wednesday showed UK annual consumer inflation slowed to 3.6% in October from 3.8% in September, the lowest level in 18 months and matching expectations from the Bank of England and economists surveyed by Reuters.

Expectations of a December rate cut grow stronger

The figures reinforced expectations that the Bank of England could proceed with an interest-rate cut in December.

Sanjay Raja, chief UK economist at Deutsche Bank, said: With the labor market softening more than expected, GDP growth weaker than the Bank of Englands projections, and core inflation consistently coming in below the Banks forecasts, we think Governor Andrew Bailey will feel increasingly confident pushing Bank Rate below 4%.

Sterling slipped 0.17% to 1.3121 dollars, after briefly touching its lowest level since Friday when UK markets were shaken by speculation surrounding the upcoming 26 November budget.

Elsewhere, investors looked for clearer direction as U.S. agencies worked to clear a backlog of delayed data following the long government shutdown.

The dollar index which tracks the greenback against six major currencies rose 0.15% to 99.75.

The yen weakened 0.4% to 156.15 per dollar, its lowest level since January.

The dollar strengthened alongside firm demand for U.S. Treasuries, even as Fed rate-cut expectations eased a sign analysts say likely reflects safe-haven flows.

Francesco Pesole, FX strategist at ING, said: We are heading into major U.S. releases, so some caution is natural, even though momentum clearly favors the dollar. He added: Its a mix of safe-haven hedging flows and continued market skepticism about a December Fed rate cut.

Fed funds futures now price a 47% implied probability of a 25-basis-point cut at the 10 December meeting, up from 42.4% the previous day, according to CMEs FedWatch tool.

President Donald Trump renewed his criticism of Fed Chair Jerome Powell on Tuesday, saying: Id love to fire the guy whos there now but someone is stopping me. Powells term ends in May.

A pivotal moment

Currency traders also kept an eye on corporate earnings, with Nvidia (NVDA.O) set to report third-quarter results later in the day.

Global markets have been under heavy pressure this week, with the SP 500 recording four straight days of losses amid concern over stretched valuations in AI-linked stocks.

We have Nvidia earnings today, and it could be a pivotal moment for equities, said INGs Pesole. Its unusual for a single earnings release to move FX markets, but if the results are extremely strong or extremely weak, the spillover could be significant.

U.S. jobless claims spike

Adding to market anxiety, Tuesdays data showed a sharp rise in the number of Americans receiving unemployment benefits between mid-September and mid-October.

Another key test arrives on Thursday with the delayed September nonfarm payrolls report, postponed due to the government shutdown.

As risk appetite weakened further, the Australian dollar fell 0.4% to 0.6485 U.S. dollars, while the New Zealand dollar dropped 0.5% to 0.56300 dollars.