Dollar hovers near three-week trough ahead of US inflation data

The dollar fell in European trade on Wednesday against a basket of major rivals, extending losses for the third straight session and almost touching three-week lows as US 10-year treasury yields slowed down. 

The decline comes ahead of the crucial US inflation data for March and the release of the Federal Reserve’s last meeting’s minutes, which could provide clues on the future of US interest rates this year.

The Price 

The dollar index fell 0.1% to 104.03 today with a session-high at 104.16.

The Index closed Tuesday down 0.1%, the second loss in a row, marking a three-week trough at 103.88. 

US Yields 

US 10-year treasury yields fell 0.5% on Wednesday away from five-month highs at 4.462%, pressuring the dollar. 

US Rates

The odds of a 0.25% Fed interest rate cut at the June policy meeting currently stand at 56%.

Traders expect two interest rate cuts totaling 50 basis points overall this week, down from 75 basis points in previous forecasts. 

US Inflation

Now investors await crucial US inflation data later today, which could change the odds of future policy moves by the Fed. 

US consumer prices are expected up 3.4% y/y in March, up from 3.2% in February, while core prices are up 3.7%. 

The Fed 

The Federal Reserve will release the minutes of its last meeting later today, at which it held interest rates unchanged at below 5.5%. 

The Fed back then said rushing to cut interest rates isn’t appropriate until there’s enough confidence that inflation is sustainably moving towards 2%. 

 Fed Chair Jerome Powell said back then that if the US economy continued to perform as expected, leaving restrictive policies could be appropriate this year. 

The Fed expects interest rates to reach 4.75% this year, and 4% in 2025, and 3.25% in 2026.