Investing.com – The U.S. dollar retreated on Wednesday after hitting a four-week high ahead of the conclusion of the Federal Reserve’s latest policy meeting.
At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.4% lower at 104.775, after hitting its strongest level since May 14 overnight on 105.46.
Dollar awaits Fed meeting
The dollar has retreated from recent highs, but the U.S. currency is in favor after Friday’s stronger-than-expected performance as traders scaled back their bets on Fed rate cuts this year.
With this in mind, all eyes will be on the release of crucial US data and the meeting, including new interest rate forecasts, later Wednesday.
The May CPI is expected to rise just 0.1% this month, an annual increase of 3.4% – still significantly above the Fed’s medium-term target of 2%.
The U.S. central bank is not expected to change interest rates this time, and traders will be watching to see whether Fed officials will change their expectations for the number of rate cuts this year.
“What could move the markets are two things. If the Fed were to remove the phrase “There has been no further progress toward the Committee’s 2 percent inflation target in recent months” from its statement, short-term U.S. yields and the dollar could fall, analysts said from ING. remark.
“Similarly, Chairman Powell typically holds a dovish press conference and the dollar has finished lower in the last four consecutive FOMC meetings. The same thing could happen today.”
The British economy did not grow in April
rose 0.1% to 1.2750, with sterling rising despite data showing the UK economy showed no growth in April, largely driven by rainy weather.
remained flat in April, after rising 0.4% month-on-month in March.
The figures followed labor market data on Tuesday that showed falling employment and rising unemployment, but continued strong wage growth.
rose 0.1% to 1.0745 after data confirmed German inflation rose in May due to higher services prices.
harmonized for comparison with other European Union countries, rose 2.8% in May from a year earlier, above the 2.4% year-on-year increase in April.
“We think the EUR/USD could find some support from today’s events in the US. However, 1.0800 is now likely to mark strong intraday resistance,” ING added
Japan’s PPI does little to support the yen
In Asia, trading was up 0.1% at 157.26, with the yen getting little support from better-than-expected data, which came just ahead of a meeting this week.
The BOJ meets on Friday and is likely to leave interest rates unchanged. But the central bank is also expected to tighten policy further by slowing the pace of bond purchases.
fell marginally to 7.2538 and remained near a six-month high as mixed Chinese inflation data sparked concerns about an economic recovery in the country.
Although the economy shrank at the slowest pace in 15 months in May, growth grew less than expected and barely stayed out of contraction territory.
