Dollar retreats as market braces for US inflation, Fed test
Federal Reserve's policy decision and updated economic projections later in the day.
The dollar had risen for three straight trading days after Friday's stronger than expected U.S. jobs report raised the prospect of inflation remaining sticky while growth stays strong, making the U.S. central bank less likely to cut interest rates in the coming months.
Investors will have a chance to assess the inflation situation when U.S. Consumer Price Index numbers are released at 1230 GMT, just hours before the Fed concludes its two-day policy meeting.
Economists polled by Reuters expect headline inflation to have risen 0.1% in May, a slower pace than the 0.3% rise the month before. Core inflation is expected to have risen 0.3% in May from April.
The Fed is widely seen holding rates at 5.25%-5.5%, putting the focus on policymakers' updated economic projections known as the «dot plot» and Chair Jerome Powell's news conference for clues regarding the timing and pace of cuts.
«Consensus seems to be that the number of cuts in 2024 will be downgraded from three currently to two» in the latest dot plot, said Kieran Williams, head of Asia FX at InTouch Capital Markets.
Powell is likely to strike a relatively dovish tone, however, given disappointing growth indicators since the last Fed meeting, Williams said.
The dollar index, which measures the greenback against a handful of major peers, slipped to 105.11, after touching its strongest level since May 14 at 105.46 on Tuesday.
«At the last four Fed meetings the dollar has ended
