Investing.com – The U.S. dollar fell on Tuesday, retreating from a one-month high as yields retreated ahead of key U.S. inflation data and the latest Federal Reserve meeting.
At 04:15 ET (08:15 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. have reached.
Dollar Retreats Ahead of CPI, Fed Meeting
The dollar got a boost from a stronger-than-expected Friday, supported by higher Treasury yields, as traders scale back bets on Fed rate cuts this year.
However, yields retreated on Tuesday, sending the dollar lower as traders opted for a more cautious stance ahead of the release of crucial US consumer price data and new interest rate forecasts on Wednesday.
May is expected to rise just 0.1% month-on-month, an annual increase of 3.4% – still significantly above the Fed’s medium-term target of 2%.
Traders continue to price in some monetary easing this year, although a cut in September is now largely seen as a 50:50 shot.
This inflation data comes just shy of the close of the Federal Reserve’s latest two-day policy-setting meeting, where no change in interest rates is virtually a certainty.
Traders will be watching to see whether Fed officials will change their expectations for the number of rate cuts this year, a move seen as likely given that they called for three cuts in their latest forecast.
“We note that the dollar has finished lower the day after the last four consecutive FOMC meetings – largely thanks to Chairman Jerome Powell’s dovish rhetoric at the press conference,” ING analysts said in a note.
“We cannot rule out this happening again as market prices from this year’s Fed easing cycle remain on the low side.”
Euro stable after French election shock
traded largely flat at 1.0761, after falling to 1.0733 on Monday, a level last seen on May 9, following the shock news that French President Emmanuel Macron called early elections after far-right gains in the election for the European Parliament.
“Macron’s government was already struggling with fiscal consolidation, and the worry now is that any National Rally administration will take a Trump-like approach to fiscal consolidation – that is, try to think its way out of the problem,” ING analysts said .
“EUR/USD will struggle to recover this month. We suspect trading will continue around July 1, 2008, with downside risks.”
fell 0.1% to 1.2719, following the release of employment data showing a decline in UK employment.
They rose from 4.3% the month before to 4.4% in April, while in May they rose above 50,000, well above the expected 10,000.
This could give the Bank of England an incentive to cut rates later this month, but it rose 5.9% in April, more than the expected 5.7%, 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 for the June 20 rates meeting for any major updates here,” ING said.
BOJ to scale back bond purchases?
In Asia, it traded 0.2% higher at 157.32 ahead of a meeting on Friday.
Investors expect a reduction in the central bank’s monthly purchases of government bonds, possibly as early as this meeting.
rose 0.1% to 7.2542, holding near a six-month high as traders worried about an uneven economic recovery.
