(Rewrites, adding US data, byline, FX table, changes dateline, updates prices at 1316 GMT)
The dollar fell on Tuesday after data showed the smallest annual increase in inflation in more than two years, cementing expectations that the Federal Reserve will announce a pause in interest rate hikes at the end of its two-day meeting on Wednesday.
The dollar index slid 0.4% to 103.15 =USD , with the euro rising 0.5% to $1.0810 EUR=EBS . Against the yen, the dollar was down 0.3% at 139.16 yen JPY=EBS .
Data showed that the consumer price index (CPI) edged up 0.1% last month as gasoline prices fell, after increasing 0.4% in April. In the 12 months through May, the CPI climbed 4.0%. That was the smallest year-on-year increase since March 2021 and followed a 4.9% rise in April.
The so-called core CPI increased 0.4% in May, rising by the same margin for the third straight month. "The numbers are probably enough to see the Fed keep rates on hold this month, as they have suggested," said Stuart Cole, chief macro economist, at Equiti Capital in London.
"But against this is the fact (that) the core monthly rate remained unchanged at 0.4%, a figure that is too high to be compatible with a 2% inflation target and very much highlighted by the much more modest fall in the annual core inflation rate. In itself, you could easily see the FOMC being able to use this figure to justify another 25-bp rise.
Traders of futures tied to the Fed's policy rate now see about a 95% chance the U.S. central bank will decide to forgo an 11th straight interest-rate hike and keep the benchmark rate at 5.00% to 5.25% on Wednesday. Before the report, traders saw about a one-in-four chance of a June rate hike.
The rate futures market also trimmed bets on a Fed rate hike in July, overwhelmingly expected in markets before the report.
======================================================== Currency bid prices at 9:16AM (1316 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 103.2000 103.5800 -0.36% -0.280% +103.6200 +103.0400 Euro/Dollar EUR=EBS $1.0799 $1.0757 +0.40% +0.78% +$1.0824 +$1.0760 Dollar/Yen JPY=EBS 139.1800 139.6150 -0.31% +6.16% +139.8300 +139.0100 Euro/Yen EURJPY= 150.29 150.17 +0.08% +7.12% +150.8500 +150.0400 Dollar/Swiss CHF=EBS 0.9060 0.9088 -0.31% -2.02% +0.9089 +0.9035 Sterling/Dollar GBP=D3 $1.2582 $1.2512 +0.58% +4.06% +$1.2605 +$1.2510 Dollar/Canadian CAD=D3 1.3328 1.3367 -0.30% -1.65% +1.3378 +1.3311 Aussie/Dollar AUD=D3 $0.6792 $0.6751 +0.61% -0.36% +$0.6807 +$0.6738 Euro/Swiss EURCHF= 0.9782 0.9777 +0.05% -1.14% +0.9795 +0.9756 Euro/Sterling EURGBP= 0.8580 0.8600 -0.23% -2.99% +0.8612 +0.8580 NZ NZD=D3 $0.6165 $0.6124 +0.69% -2.90% +$0.6178 +$0.6104 Dollar/DollarDollar/Norway NOK=D3 10.6850 10.8170 -1.32% +8.76% +10.8070 +10.6740 Euro/Norway EURNOK= 11.5383 11.6189 -0.69% +9.91% +11.6816 +11.5259 Dollar/Sweden SEK= 10.7367 10.8120 -0.35% +3.16% +10.8327 +10.7147 Euro/Sweden EURSEK= 11.5948 11.6357 -0.35% +3.99% +11.6509 +11.5882 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5EDollar index June 13 https://tmsnrt.rs/3Nqx17q
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