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16/05/24
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USD Steady After Sharp Fall Induced By CPI
On Thursday the U.S. dollar was steady in European trade, after falling to multi-week lows overnight after a softer U.S. inflation report, which brought the focus back to Fed rate cuts.
The U.S. dollar index, which measures its strength against 6 other major currencies, was up 0.1% at 104.285, after falling overnight to a 5-week low of slightly lower than 104.
The dollar is still on the back foot after U.S. inflation data increased expectations the Federal Reserve would implement 2 interest rate cuts this year, probably beginning in Sept.
The consumer price index for April released on Wednesday lifted by 0.3%, lower than the expected gain of 0.4%, which was a relief to markets after persistent consumer prices in Q1 had resulted in a sharp trimming of rate cut bets and even fueled some concerns of another hike.
The data also led to U.S. Treasury yields dropping to six-week lows, as traders reevaluated the path of the Fed’s monetary policy.
Analysts at ING said in a note that markets were giving a bigger weight to the good news that came from two days of inflation figures, which has resulted in the dollar almost entirely erasing the gains after mid-April’s CPI disappointment.
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