Traders have pushed back expectations on when the Federal Reserve will begin trimming rates to June as officials caution that they want to see more evidence that inflation will continue to drop
The dollar index edged down on Wednesday after minutes from the Fed’s January meeting came in largely as expected and showed that the majority of policymakers were concerned about the risks of cutting interest rates too soon.
Traders have pushed back expectations on when the Federal Reserve will begin trimming rates to June as officials caution that they want to see more evidence that inflation will continue to drop.
“Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained” to return inflation to the Fed’s target of 2%, stated the meeting minutes.
The overall message is that they are watching the progress but they are not quite there, said Vassili Serebriakov, an FX strategist at UBS in New York.
Higher than expected consumer and producer price inflation last week has raised the possibility that the Federal Reserve could hold rates higher for longer, or even make further hikes if it continues.
Nonetheless, retail sales numbers and other data have also been showing some signs of weakness, which has sent the greenback lower over the past week.
There is still enough of a question mark with respect to incoming data and as a result we have seen the dollar come under a bit of pressure, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, adding, this is really a data driven environment.
The dollar index was down 0.04% on the day at 104.00, after hitting 103.79 on Tuesday, the lowest level since February 2.
The euro added 0.1% to $1.0815. The dollar gained 0.13% to 150.19 yen.
