Dollar drifts as traders eye US inflation data; frail yen in focus
inflation report this week that will likely shape the U.S. rates outlook, while the yen was hovering near a two-week low, stoking intervention worries.
The currency market has been sedate this week, with investors seeking to gauge what the path the Federal Reserve will take this year in the wake of recent softer-than-expected U.S. labour market data and comments from central bankers.
They have had to dial back their expectations of rate cuts this year due to sticky inflation and are now pricing in 42 basis points of easing this year, with 60% chance of a cut in September, according to CME FedWatch tool.
All eyes this week will be on the consumer price index on Wednesday which is expected to show core CPI rose 0.3% month-on-month in April, less than 0.4% growth the prior month, according to a Reuters poll.
But before that, U.S. Producer Price Index is due to be released later on Tuesday, which analysts will parse through to get a sense of whether inflation is heading towards the Fed's target of 2%.
«The focus will centre on the key items that feed into core personal consumption expenditures (PCE), i.e., healthcare services, portfolio management, and domestic airfares,» said Tony Sycamore, market analyst at IG.
The euro was little changed at $1.0786 but is up 1% against the dollar so far this month, while sterling last bought $1.2554, up roughly 0.5% so far in May.
The dollar index, which measures the U.S. currency against six rivals, was last at 105.25.
Nearly two-thirds of economists expect the Fed to cut
