Investing.com – The US dollar fell on Wednesday, pulling back after hitting a four-week high overnight before 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 down 0.4% at 104.775, after touching its strongest level since May 14 at 105.46 overnight.
The dollar awaits the Fed meeting
The dollar retreated from recent highs, but demand for the greenback was stronger than expected on Friday, as traders trimmed their bets on Federal interest rate cuts this year.
With this in mind, all eyes will be on the release of crucial US data and meeting, including new interest rate forecasts, later on Wednesday.
The CPI for May is expected to rise just 0.1% during the month, a 3.4% annual rise – still well above the Fed's medium-term target of 2%.
The US central bank is not expected to change interest rates this time, and traders will be looking to see if Fed officials change their expectations for the number of interest rate cuts this year.
“What could move markets are two things. If the Fed removes the sentence, analysts at ING said in a report, “In recent months, there has been a lack of further progress toward the committee’s 2 percent inflation target.” From his statement, short-term US dollar yields may decline significantly.
“Similarly, Chair Powell typically holds a dovish press conference, and the dollar has closed lower intraday during the last four consecutive FOMC meetings. The same could happen today.”
The British economy failed to grow in April
It rose 0.1% to 1.2750, with sterling rising despite data showing the British economy did not grow in April, largely due to wet weather.
It was flat in April, after rising 0.4% month-on-month in March.
The numbers came on the heels of labor market data on Tuesday that showed employment falling and unemployment rising, but continued strong wage growth.
It rose 0.1% to 1.0745 after data confirmed that German inflation rose in May due to rising service prices.
Interest rates, harmonized for comparison with other EU countries, rose 2.8% in May from a year earlier, which is more than the 2.4% annual rise seen in April.
“We believe that the EUR/USD pair may find some support from today's events in the US. However, the 1.0800 level is now likely to represent strong intraday resistance.”
Japan's producer price index did little to support the yen
In Asia, the currency traded up 0.1% to 157.26, with the yen getting a little support from hotter-than-expected data, which came ahead of this week's meeting.
The Bank of Japan is scheduled to meet on Friday and is likely to keep interest rates unchanged. But the central bank is also expected to tighten policy further by reducing the pace of bond purchases.
The index fell marginally to 7.2538, remaining close to six-month highs after mixed Chinese inflation data raised concerns about the country's economic recovery.
While it contracted at its slowest pace in 15 months in May, it grew at a lower-than-expected rate, barely staying outside contraction territory.
