Investing.com – The U.S. dollar fell from a one-month high on Tuesday as yields fell ahead of key U.S. inflation data and the latest Federal Reserve meeting.
At 04:15 ET (0815 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.3% lower at 104.795, after hitting 105.39 on Monday for the first time since May 14.
Dollar declines ahead of consumer price index and Fed meeting
The dollar received support from stronger-than-expected trading on Friday, helped by higher Treasury yields as traders trimmed bets on the Fed cutting rates this year.
However, yields fell on Tuesday, dragging the dollar lower as traders took a more cautious stance ahead of key US consumer price data and new interest rate forecasts on Wednesday.
May growth is expected to be just 0.1% month-on-month, for annual growth of 3.4%, still well above the Fed’s medium-term target of 2%.
Traders continue to expect some monetary easing this year, although the September cut is now largely seen as a 50:50 chance.
This inflation data comes in slightly lower as the Federal Reserve concludes its final two-day policy-setting meeting, with little change in interest rates in doubt.
Traders will be watching to see whether Fed officials change their expectations for the number of interest rate cuts this year, a move considered likely given they called for three cuts in their latest forecast.
“We note that the dollar fell the day after the last four consecutive FOMC meetings – largely due to Chairman Jerome Powell’s dovish rhetoric at the press conference,” ING analysts said in a note.
“We cannot rule out this happening again given that market prices for the Fed’s easing cycle remain subdued this year.”
Euro stabilizes after French election shock
The market traded little changed on Monday at 1.0761 after falling to 1.0733, a level last seen on May 9, following the shock news that French President Emmanuel Macron had called early elections following the far-right’s success in the French elections. European Parliament.
“The Macron government has already struggled with fiscal consolidation, and the worry now is that any National Rally government will follow Trump’s approach to fiscal consolidation – that is, trying to find a way out of the problem,” ING analysts said.
“Euro/dollar will struggle to rally this month. We suspect it will continue to trade around 1.07/08 with downside risk.”
fell 0.1% to 1.2719 after labor data showed a decline in UK employment.
The figure rose to 4.4% in April from 4.3% the previous month, and in May the figure topped 50,000, well above the 10,000 expected.
That could give the Bank of England incentive to start cutting interest rates later this month, but they rose 5.9% in April, faster than the 5.7% expected, suggesting wage-driven inflation remains a problem.
“Given the Bank of England’s lack of ability to communicate with the market due to the July 4 election, we will have to wait until the Bank of England rate meeting on June 20 for important news,” ING said.
Will the Bank of Japan reduce bond purchases?
In Asia, trade traded 0.2% higher at 157.32 ahead of Friday’s meeting.
Investors expect the central bank to cut monthly government bond purchases, possibly as early as this meeting.
rose 0.1% to 7.2542, remaining near a six-month high as traders worried about an uneven economic recovery.