Dollar grinds higher in European trade

The dollar gained ground against the yen, euro and pound on Wednesday, as expectations of a pro-growth message from US President-elect Donald Trump's first news conference prevailed over worries about what he will say on trade and China. The dollar has gained broadly since Trump's victory in November as investors bet he would boost public spending and spur repatriation of overseas funds by US companies, policies expected to bring higher inflation and interest rates.
But more doubts have emerged in recent weeks about that narrative, and investors will have a close eye on what the new president says about labelling China a currency manipulator and free trade more generally. "The surprise would be if he talks about his concerns about dollar strength," said Simon Derrick, head of research at Bank of New York Mellon in London.
"He has made comments suggesting he is uncomfortable with a strong dollar, but the market has largely ignored them." The dollar index rose 0.3 percent to 102.37, at the top end of a range it has held for the past week and off a 14-year peak of 103.82 hit on January 3. Against the yen, it gained almost half percent to 116.28 yen, still two percent off almost one-year highs hit in December.
The euro was also down 0.4 percent at $1.0515 after brushing a 10-day high of $1.0628 overnight. Trump's news conference - his first since the election - is due to start at around 11:00 EST (1600 GMT). "The dollar is still holding up quite well and there is a presumption that we are going to get support from tighter monetary policy and looser fiscal policy," said Jeremy Stretch, head of currency strategy at CIBC in London. "Overall we're still constructive but it does look more a case of playing the end of the rally before we see a correction later this year."
The morning's other big mover in Europe was sterling, hit by a worse than expected trade deficit after a week of political news which added to fears Britain is heading for an economically damaging "hard Brexit" from the European Union. The pound fell by as much as 0.6 percent to trade below $1.21 for the first time since late October, before steadying at $1.2112.