Dollar Retreats Amid Softer-Inflation Data and Weakened Rate Hike Bets
The US dollar retreated against major currencies on Wednesday following data that showed a smaller-than-expected increase in US inflation. The Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation gauge, rose 0.3% last month, lower than the 0.4% increase forecast by economists polled by Reuters.
The dollar had been strengthening on growing expectations of more Fed rate hikes amid inflation driven by higher oil prices. However, with the data showing a softer-than-expected print, market bets on an interest rate hike from the Federal Reserve decreased. The 2-year note yield fell 4.15 basis points to 4.848%.
The euro rose 0.15% to $1.135725 following the data release. John Velis, FX and macro strategist at BNY, noted that it's unclear whether the revised PCE data or other factors were responsible for the softer-than-expected print.