The dollar hit an 11-week high, and inflation data depressed the pound to a two-month low

It should be reminded that the dollar strengthened by 0.3% on Wednesday, hitting an 11-week high of 103.60, which still makes gold bulls have concerns. Some bulls took profits near historical highs, causing gold prices to fall slightly in late trading on Wednesday. On the one hand, investors ruled out the possibility of the Federal Reserve cutting interest rates sharply at its next policy meeting and digested the possibility that former President Trump may win the election.

(One-hour chart of the US dollar index)

Sterling, meanwhile, fell to a two-month low after weaker-than-expected UK inflation data gave the Bank of England room to cut interest rates more aggressively, while the euro fell to an 11-week low ahead of the European Central Bank meeting. However, the prospect of interest rate cuts by the Bank of England and the European Central Bank also provided support for gold prices.

But with the US Presidential Election just weeks away, investor focus has shifted to the high-profile election and the path of the Federal Reserve's interest rates.

Mr. Trump's plans for tax cuts, financial deregulation and higher tariffs are seen as positive for the dollar. For example, higher tariffs would negatively impact growth in Asian and European exporters, potentially forcing their central banks to lower interest rates, weakening their currencies and boosting the dollar.

foreign exchange trading platformAmo Sahota, a San Francisco-based executive director, said central banks were expected to cut interest rates more than the Fed because their economies were slowing much faster than the US, supporting the dollar.

He also cited Trump's remarks in an interview with Bloomberg News editor-in-chief John Micklethwait at the Economic Club of Chicago on Tuesday, in which the former president doubled down on his plans to impose steep tariffs on U.S. trading partners.

"Trump did speak harshly on tariffs... although I think he was just making the point that he would stop at nothing to stop people from" flooding the market with foreign products at the expense of American-made goods. "Add to that last night's polls showing Trump with a slight lead... that's enough to make the dollar the best performing currency."

Investors will be watching Thursday's European Central Bank meeting closely, but if policymakers cut interest rates by 25 basis points, as currently expected by the market, and President Christine Lagarde avoids giving too many clues on the outlook for interest rates, the impact on the market may be small.