During today's Asian trading, the US dollar declined slightly against major currencies, while investors took a wait-and-see attitude ahead of the publication of US inflation data, which may change the prospects for tightening the Fed's monetary policy.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.10% to 102.12. Yesterday the index fell by 0.45%.
As for the US CPI data, economists' forecasts suggest that in March, overall inflation fell to 5.2% year-on-year from 6.0% in February, while core inflation accelerated to 5.6% from 5.5% in February. According to the CME FedWatch Tool, markets see a 74.8% chance of a 25 basis point rate hike at the Fed's May meeting. If the CPI data show a stronger than expected weakening of price pressure in March, the market may slightly strengthen expectations that the Fed rates will remain at the same level. However, given the strong US labor market report for March, the scenario in which the Fed will suspend rate hikes in May seems unlikely.
Yesterday, a number of Fed policymakers gave no indication as to how much further U.S. interest rates would rise, with New York Fed President John Williams saying that the Fed's policy path will depend on incoming data. Meanwhile, Philadelphia Fed President Patrick Harker said that, in his opinion, the end of the rate hike may be near. Meanwhile, Chicago Fed President Austan Goolsbee said the Fed should be patient with raising interest rates amid recent stress in the banking sector.