Investing.com – The U.S. dollar retreated Wednesday, falling back after hitting a four-week high overnight ahead of the conclusion of the latest Federal Reserve policy meeting.
At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower at 104.775, after touching its strongest level since May 14 at 105.46 overnight.
Dollar awaits Fed meeting
The dollar has slipped back from recent highs, but the U.S. currency has been in demand after Friday’s stronger-than-expected , as traders pared back bets for Fed rate cuts this year.
With this in mind, all eyes will be on the release of crucial U.S. and the meeting, including fresh interest rate forecasts, later Wednesday.
The May CPI is expected to rise just 0.1% on the month, an annual rise of 3.4% – still considerably above the Fed’s 2% medium-term target.
The U.S. central bank is not expected to change interest rates this time around, and traders will be looking to see if the Fed officials change their expectations for the number of interest rate cuts this year.
“What could move the markets are two things. Should the Fed remove the sentence ‘In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective’ from its statement, short-dated US yields and the dollar could drop,” said analysts at ING, in a note.
“Equally, Chair Powell typically delivers a dovish press conference and the dollar has ended lower on the day over the last four consecutive FOMC meetings. The same could happen today.”
UK economy failed to grow in April
rose 0.1% to 1.2750, with sterling rising despite data showing Britain’s economy showed no growth in April, caused in large part by rainy weather.
was flat in April, after a 0.4% month-on-month rise in March.
The figures followed labor market data on Tuesday that showed falling employment and rising unemployment, but continued strong wage growth.
rose 0.1% to 1.0745, after data confirmed that German inflation rose in May due to higher services prices.
, harmonised to compare with other European Union countries, rose 2.8% in May from a year earlier, above the 2.4% year-on-year rise seen in April.
“We think EUR/USD could find some support from events in the U.S. today. However, 1.0800 will now probably mark strong intraday resistance,” ING added
Japan PPI does little to support yen
In Asia, traded 0.1% higher to 157.26, with the yen receiving little support from hotter-than-expected data, which came just before a meeting this week.
The BOJ is set to meet on Friday and is likely to keep rates unchanged. But the central bank is also expected to tighten policy further by reducing its pace of bond purchases.
slipped marginally lower to 7.2538, remaining close to six-month highs after mixed Chinese inflation data raised concerns over an economic recovery in the country.
While shrank at its slowest pace in 15 months in May, grew less than expected, barely staying out of contraction territory.
