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.
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.
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.
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