At 04:10 ET (08:10 GMT), the Dollar Index, which measures the dollar against six other currencies, was down 0.4% at 104.775, after hitting its strongest level since May 14 at 105.46 overnight.
Dollar Awaits Fed Meeting The dollar has pulled back from recent highs, but it has been in demand since Friday’s stronger-than-expected jobs report, as traders reduced their bets on Fed rate cuts this year.
With this in mind, all attention will be on the release of crucial U.S. consumer price data and the Fed meeting, including new interest rate forecasts, later on Wednesday.
The May CPI is expected to rise just 0.1% for the month, with an annual increase of 3.4%—still well above the Fed’s 2% medium-term target.
The U.S. central bank is not expected to change interest rates this time, and traders will be watching to see if Fed officials adjust their expectations for the number of interest rate cuts this year.
“What could move 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-dated U.S. yields and the dollar could drop,” said analysts at ING, in a note.
“Similarly, Chair Powell typically delivers a dovish press conference, and the dollar has ended lower on the day over 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 the pound rising despite data showing Britain’s economy did not grow in April, mainly due to rainy weather.
Gross domestic product was flat in April, after a 0.4% rise in March.
The figures followed labor market data on Tuesday that 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 increase seen in April.
“We think EUR/USD could find some support from events in the U.S. today. However, 1.0800 will now probably mark 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 likely 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 lower to 7.2538, remaining close to six-month highs after mixed Chinese inflation data raised concerns about 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.