On Wednesday, the dollar held its ground ahead of the release of inflation data that could influence the Federal Reserve's interest rate policy.
Today, traders will be focusing on the US Consumer Price Report for March. The overall CPI is expected to rise by 0.3% on a monthly basis and 3.4% on an annual basis.
Fed interest rate expectations have shifted to a more hawkish stance in recent weeks on the back of recent economic data, including the employment report. However, investor expectations for a Fed rate cut at the June meeting have increased ahead of the inflation data release.
According to CME's FedWatch data, markets are now pricing in a 60% probability of a Fed rate cut in June, up from around 51% on April 8.
The Commonwealth Bank of Australia's Carol Kong said strong inflation numbers could lead markets to expect a rate cut in June, which would cause a sharp rise in the dollar, Reuters reported.
"A strong core CPI reading at or above 0.3% (month-on-month) would likely tip the balance in favor of a June rate cut, as there are two more CPI readings before the meeting that are unlikely to be sufficient to show a slowing trend in inflation," Kong said.
The Dollar Index (.DXY), which tracks the greenback against its global counterparts, was up 0.03% at 104.13.
EUR/USD fell 0.04% to 1.0851 in anticipation of the European Central Bank meeting, while GBP/USD rose 0.02% to 1.2679.
USD/JPY rose 0.02% to 151.80, with gains limited by a warning from Japan about possible intervention to stabilize the yen.
Carol Kong warned that the US CPI data will be a big test for the Japanese authorities to hold the yen.
NZD/USD rose 0.17% to 0.6070 after the Reserve Bank of New Zealand (RBNZ) kept its monetary policy unchanged.
At its meeting on January 10th, the RBNZ kept the interest rate at 5.5%, emphasizing that previous rate hikes have slowed the economy and contained price increases, but inflation remains above target.
AUD/USD fell 0.05% to 0.6623.
USD/CNY rose 0.02% to 7.2327 in anticipation of China's inflation and trade data.
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