Dollar steadies as traders weigh hotter-than-expected inflation
By Brigid Riley
TOKYO (Reuters) — The U.S. dollar held steady against a handful of rival currencies on Wednesday, as traders weighed what impact hotter-than-expected inflation data could have on chances of an interest rate cut at the Federal Reserve's June meeting.
The U.S. consumer price index (CPI) increased solidly in February, beating forecasts and suggesting some stickiness in inflation.
Although the CPI rose 0.4% in February in line with forecasts, a 3.2% year-on-year gain came in just ahead of an expected 3.1% increase. Core figures also topped estimates.
That has left analysts wondering whether the Fed will have sufficient data to justify more than a couple of rate cuts all year.
Still, market expectations for rate cuts to begin at the Fed's June 11-12 meeting have eased only a touch to about a 67% likelihood versus 71% earlier in the week, according to the CME Group's (NASDAQ:CME) FedWatch Tool.
"(Fed Chair) Powell might now regret speaking of cuts during his testimony last week, as I suspect it explains why Fed Fund futures are still pricing in a June cut," said Matt Simpson, senior market analyst at City Index.
«As the U.S. dollar handed back most of its post-CPI gains, I suspect the rebound in the U.S. yield curve provides the more accurate picture; a June cut is less likely.» [US/]
Still, with many of the greenback's peer currencies holding close to flat, it suggests traders are taking the latest data in stride, he added.
The dollar index, which measures the greenback against a basket of peer currencies, was little changed at 102.91.
Attention now turns to U.S. retail sales, an indication of consumer spending which has been resilient so far, and producer prices due out later this week.
Against the yen, the
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