Investing.com – The U.S. dollar edged higher in early European trade Wednesday, stabilizing after the previous session’s sharp declines as investors look for clues on the path for Federal Reserve policy. 

At 03:00 ET (07:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 103.525, rebounding after dropping 0.4% the previous session, its worst day in a month and a half.

Dollar slumps after weak JOLTS data 

The greenback slumped on Tuesday, pulling back sharply from a near three-month high, as markets bet after the release of data showing fell to a 2-1/2 year low in July, prompting traders to pare bets for further interest rate hikes by the Federal Reserve this year.

The is widely expected to pause on another interest rate hike next month, but Chair said at the end of last week that the central bank officials stand ready to raise rates further as required depending on the economic data.

“We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” Powell stated.

There is more U.S. labor data to digest later Wednesday, in the form of , while the second reading of the latest data is expected to show that the U.S. economy grew 2.4% in the second quarter, an improvement from 2.0% the prior quarter.

Euro slips as German import prices fall

fell 0.1% to 1.0873, handing back some of the 0.6% overnight rally, after fell by 13.2% year on year in July, the sharpest drop since January 1987.

Germany is set to publish preliminary inflation data for August later Wednesday, and its is expected to fall to 6.0% from 6.2% in the previous month.

This would still be higher than the annual inflation figure for the wider eurozone, which is expected to show a small drop to 5.1% from 5.3% in July. However, the falling import prices point to the likelihood of sharp falls in the German inflation data.

Elsewhere, fell 0.1% to 1.2633, with sterling struggling after property website Zoopla forecast that the number of house purchases in Britain this year is on course to drop by 21% to its lowest since 2012 as a result of rising borrowing costs.

rose 0.3% to 146.36, having surged to a 10-month peak at 147.375 on Tuesday, before retreating on the JOLTS report. These levels prompted yen buying intervention by Japanese officials last autumn.

fell 0.2% to 0.6467 after inflation data read weaker than expected for July, while rose 0.2% to 7.2917 ahead of the release of key data on Thursday.