Forex Dollar Declines Following Lower-than-Expected CPI Report

The U.S. dollar weakened on Wednesday after new data indicated that consumer prices in April rose less than anticipated. This trend supports the belief that inflation is on a downward trajectory, increasing the likelihood of Federal Reserve interest rate cuts in September.

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According to the Labor Department's Bureau of Labor Statistics, the consumer price index (CPI) increased by 0.3% in April, following a 0.4% rise in both March and February. On an annual basis, the CPI rose by 3.4%, slightly down from the 3.5% increase recorded in March. These figures fell short of economists' expectations, who had forecast a 0.4% monthly increase and a 3.4% year-on-year rise, according to a Reuters poll.

In response to the CPI report, the dollar index, which measures the value of the U.S. dollar against a basket of major currencies including the euro and yen, fell by 0.45% to 104.56. The euro strengthened by 0.34% to $1.0855, while the dollar weakened against the yen, declining by 0.72% to 155.28.

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This recent data reinforces the market's anticipation of Federal Reserve rate cuts later in the year, as a cooling inflation trend could prompt policymakers to ease monetary conditions to support economic growth.

Also Read: Forex Dollar Weakens as Unemployment Claims Rise; Pound Recovers on BoE Comments