© Reuters
By Peter Nurse
Investing.com – The US dollar fell in early European trade on Wednesday, as traders cautiously awaited the release of the latest US inflation data that could influence the Federal Reserve’s future monetary policy.
At 03:05 ET (07:05 GMT), the US dollar was trading lower against a basket of six other currencies, down 0.2%, to 101,700.
It rose 0.2% to 1.0930 and was trading 0.1% higher at 1.2431 in narrow trading ranges.
The main focus on Wednesday will be the US CPI for March, as traders try to determine the US central bank’s next move.
The general perception is that there is another 25bp increase left in the rate hike cycle in May, before starting to cut rates later in the year.
The head of the Philadelphia Fed said on Tuesday that he felt the end of rate hikes may be near, while the New York Fed chief indicated that further decisions depended on incoming data.
It is due at 08:30 ET (12:30 GMT) and is expected to come in at 5.1% yoy, down from 6.0% previously, while the all-important core inflation, which excludes food price volatility And energy, it’s likely to be higher to higher.
Also interesting will be the release of the latest Federal Reserve meeting, which could reveal the thinking of policymakers as they hiked interest rates by 25 basis points last month in the midst of a banking crisis.
“Any signs that the Fed is very close to peaking interest rates — and that it will have the ability to cut rates if necessary — will be viewed as risk positive and dollar negative,” ING analysts said in a note.
Elsewhere, the risk-sensitive index rose 0.1% to 0.6655, while falling to 133.60, just below a one-month high, as traders contrasted possible tightening by the Federal Reserve with New Bank of Japan Governor Kazuo Ueda pledging to stick to super easy. Stimulation settings when it is installed.