TOKYO- The US 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 US consumer price index (CPI) increased solidly in February, beating forecasts and suggesting some stickiness in inflation.
Although the CPI rose 0.4 percent in February in line with forecasts, a 3.2 percent year-on-year gain came in just ahead of an expected 3.1 percent 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 meeting have eased only a touch to about a 67 percent likelihood versus 71 percent earlier in the week, according to the CME Group’s FedWatch Tool.
“(Fed Chair Jerome) 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 US dollar handed back most of its post-CPI gains, I suspect the rebound in the US yield curve provides the more accurate picture; a June cut is less likely.”
The dollar index which measures the greenback against a basket of peer currencies, was little changed at 102.93.
Attention now turns to US retail sales, an indication of consumer spending that has been resilient so far, and producer prices due out later this week.
Against the yen, the dollar was mostly flat at 147.60 after the Japanese currency saw its biggest fall in a month on Tuesday following Bank of Japan Governor Kazuo Ueda’s slightly bleaker assessment of the nation’s economy.
