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12/06/24
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USD Down Before CPI Data, Fed Meeting
On Wednesday, the U.S. dollar fell back after reaching a 4-week high overnight before the end of the latest Fed policy meeting.
The U.S. dollar index, which measures its strength against 6 other major currencies, traded down 0.4% at 104.775, after overnight hitting 105.46, its strongest level since May 14.
Although the dollar has dropped from recent highs, the currency has been in demand after the stronger-than-expected jobs report on Friday, as traders trimmed bets for Fed rate cuts this year.
The focus will now be on the Fed meeting and the release of key U.S. consumer price data, later on Wednesday.
The CPI for May will likely rise by only 0.1% for the month, an annual increase of 3.4% – still considerably higher than the Fed’s 2% target.
It is not expected the U.S. central bank will change interest rates at this meeting, and traders will be watching to see if Fed policymakers change their views on the number of interest rate cuts in 2024.
Analysts at ING said in a note the markets could be moved by two things. Short-dated US yields and the dollar could drop if the Fed drops the sentence there has been no further progress toward the 2% inflation target in recent months from the statement.
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