Dollar Weakens As Soft U.S. Inflation Data Boosts Fed Pause Hopes

(RTTNews) - The U.S. dollar was lower against its major counterparts in the European session on Wednesday, as the nation's consumer inflation came in lower than expected in April, raising expectations that the Federal Reserve is likely to pause its policy tightening in the future.

Data from the labor Department showed that the consumer price index edged down to 4.9 percent year-over-year in April from 5.0 percent in March. Economists had expected the year-over-year growth to be unchanged.

The annual rate of core consumer price growth also slipped to 5.5 percent in April from 5.6 percent in March. The modest slowdown matched economist estimates.

On a monthly basis, the consumer price index climbed by 0.4 percent in April after inching up by 0.1 percent in March. Economists had expected consumer prices to rise by 0.4 percent.

Excluding food and energy prices, core consumer prices also rose by 0.4 percent in April, matching the increase seen in March as well as economist estimates.

Fed funds futures traders are pricing in an 86 percent possibility of the Fed holding rates at its next meeting in June.

U.S. treasury yields dropped, with the benchmark yield on the 10-year note touching 3.47 percent. Yields move inversely to bond prices.

The greenback touched 1.2679 against the pound, its lowest level since April 2022. The pair had finished yesterday's trading session at 1.2619. Further fall in the greenback may find support around the 1.29 mark.

The USD/CHF pair dropped to a 2-day low of 0.8868 from yesterday's close of 0.8904. The greenback may face support around the 0.87 region, if it falls again.

The USD/JPY pair declined to a 5-day low of 134.28, from a 1-week high of 135.47 seen at 2:15 am ET. The pair was worth 135.20 when it ended deals on Tuesday. The greenback is likely to challenge support around the 130.00 level.

The greenback dipped to near a 3-month low of 0.6381 against the kiwi and a 2-day low of 1.3334 against the loonie, from yesterday's closing values of 0.6334 and 1.3383, respectively. Next key support for the currency is likely seen around 0.66 against the kiwi and 1.30 against the loonie.

The greenback fell to a 2-1/2-month low of 0.6818 against the aussie, after hitting a 2-day high of 0.6744 at 8:15 am ET. The pair was worth 0.6761 at Tuesday's close. The greenback is seen finding support around the 0.70 mark.

The greenback weakened to a 2-day low of 1.1006 against the euro, from an 8-day high of 1.0941 it logged at 8:15 am ET. The pair had closed Tuesday's deals at 1.0960. The currency may find support around the 1.12 level.

U.S. monthly budget statement for April is scheduled for release in the New York session.