Dollar remains stable as inflation data looms, yen falters, Fed rate reduction improbable | Global Updates

The dollar remained steady on Wednesday as investors speculated that the Federal Reserve would not cut interest rates until later in the year. This anticipation came ahead of key inflation data releases this week, causing the yen to weaken to its lowest level in four weeks.

Rising Treasury yields also supported the dollar, following a lacklustre debt auction for two-year and five-year notes that raised concerns about demand for US government debt.

The euro dipped slightly to $1.0850, but was on track for a 1.7% gain for the month, its first monthly increase in 2024. Meanwhile, the Australian dollar initially surged before stabilizing, boosted by higher-than-expected consumer price inflation in April.

US consumer confidence unexpectedly improved in May, although worries about inflation persisted. Market participants are now pricing in a 34 basis point cut in interest rates this year, compared to the 150 basis points expected at the beginning of 2024.

Investors are closely watching a series of inflation reports this week, with the US core personal consumption expenditures (PCE) price index report due on Friday. This report, the Fed’s preferred measure of inflation, is expected to remain steady on a monthly basis.

The yen touched a four-week low against the dollar, prompting concerns about potential interventions from Japanese authorities. The currency has weakened by 10% against the dollar this year but may still see a monthly gain in May.

Overall, market focus remains on inflation data releases and the Fed’s next move, with expectations shifting as economic conditions evolve.