At 04:10 ET (08:10 GMT), the Dollar Index, which measures the greenback against six other currencies, was 0.4% lower at 104.775, after reaching its highest level since May 14 at 105.46 overnight.
Dollar Awaits Fed Meeting The dollar has pulled back from recent highs, but demand remains strong after Friday’s better-than-expected jobs report, leading traders to reduce their expectations for Fed rate cuts this year.
All attention will be on the upcoming U.S. consumer price data and the Fed meeting, which includes new interest rate forecasts, later on Wednesday.
The May CPI is expected to increase by just 0.1% month-over-month, with an annual rise of 3.4%, which is still above the Fed’s 2% medium-term target.
The U.S. central bank is not expected to change interest rates this time, but traders will be watching to see if Fed officials adjust their expectations for the number of interest rate cuts this year.
“What could impact the markets are two things. If the Fed removes the sentence ‘In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective’ from its statement, short-term US yields and the dollar could drop,” said analysts at ING.
“Also, Chair Powell usually gives a dovish press conference, and the dollar has dropped on the day of the last four consecutive FOMC meetings. The same could happen today.”
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UK Economy Stagnates in April GBP/USD rose 0.1% to 1.2750, with sterling rising despite data showing Britain’s economy did not grow in April, largely due to rainy weather.
Gross domestic product was flat in April, following a 0.4% month-on-month increase in March.
The figures came after labor market data on Tuesday showed falling employment and rising unemployment, but continued strong wage growth.
EUR/USD Rises Slightly EUR/USD rose 0.1% to 1.0745, after data confirmed that German inflation increased in May due to higher services prices.
German consumer prices, harmonized to compare with other European Union countries, rose 2.8% in May from a year earlier, above the 2.4% year-on-year rise seen in April.
“We think EUR/USD could find some support from events in the U.S. today. However, 1.0800 will now likely act as strong intraday resistance,” ING added.
Japan PPI Does Little To Support Yen In Asia, USD/JPY traded 0.1% higher to 157.26, with the yen receiving little support from hotter-than-expected PPI data, which came just before a Bank of Japan meeting this week.
The BOJ is set to meet on Friday and is expected to keep rates unchanged. But the central bank is also expected to tighten policy further by reducing its pace of bond purchases.
USD/CNY Marginally Lower USD/CNY slipped slightly to 7.2538, remaining close to six-month highs after mixed Chinese inflation data raised concerns over an economic recovery in the country.
While producer prices shrank at their slowest pace in 15 months in May, consumer prices grew less than expected, barely staying out of contraction territory.