Dollar weakens as US data points to easing inflation pressure
A dollar gauge saw its biggest drop in nearly four weeks on Wednesday as price pressures in the US services industry eased and Federal Reserve Chair Jerome Powell said he wants to see inflation move sustainably to the US central bank’s 2% goal before starting to lower interest rates.
The Bloomberg Dollar Spot Index fell as much as 0.4% on an intraday basis on Wednesday — the steepest decline since March 8 — with nearly all currencies from developed economies gaining against the greenback. Growth in the US services sector eased last month while a gauge of input costs decreased to a four-year low, according to a report by the Institute for Supply Management.
“It felt like a bit too much was priced in,” said Brad Bechtel, global head of FX at Jefferies Financial Group Inc., referring to the dollar levels. “Today’s ISM report highlights that it’s not all roses for the US economy, and therefore taking some of the steam out of it.”
Fed Chair Powell said policymakers need “greater confidence” about the outlook for inflation. Traders are now predicting less than three rate cuts this year, following earlier expectations of as many as six rate reductions in 2024.
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