On Tuesday, the dollar strengthened slightly against its global counterparts in anticipation of US producer price inflation data for April and a speech by Federal Reserve Chairman Jerome Powell.
Markets are expecting the Producer Price Index (PPI) to rise 0.3% month-over-month in April, following a 0.2% increase in March.
In addition, the latest job data and comments from Fed officials have led markets to revise their expectations for a change in the US central bank's monetary policy, Reuters reported.
CME's FedWatch data showed that markets are now pricing in a 60% chance of a Fed rate cut in September, down from 75% a month ago.
EUR/USD fell 0.02% to 1.0786 as traders are cautious ahead of the release of ZEW German and EU sentiment data.
The GBP/USD fell 0.04% to 1.2553 as the pound lost all of the bullish momentum it had gained from better-than-expected U.K. Gross Domestic Product (GDP) data. Traders are now turning their attention to the employment data expected later today.
The USD/JPY is up 0.15% at 156.44. The yen continues to fall despite a hawkish signal from the Bank of Japan to reduce purchases of Japanese government bonds. The move is expected to put upward pressure on Japanese bond yields and help narrow the gap between Japanese and US interest rates. However, traders saw this as a muted signal that would have little impact on the yen.
The AUD/USD is down 0.05% at 0.6604, while the NZD/USD is up 0.12% at 0.6021. The kiwi is rising despite the Reserve Bank of New Zealand reporting that two-year inflation expectations fell to 2.33% in the second quarter of 2024, from 2.50% in the first quarter.
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