Dollar under pressure as pace of US inflation slows

Investing.com -

Investing.com - The dollar fell against a basket of currencies on Wednesday, after a pair of economic reports undershot expectations triggering concerns about a slowdown in the U.S. economy ahead of a widely expected interest rate hike from the Federal Reserve.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, fell by 0.51% to 96.48, its lowest level since Nov 9.

U.S. consumer prices, a measure of inflation, fell 0.1% in May, as a fall in energy prices, airline fares and apparel weighed on the pace of inflation, the labor department said. The measure of inflation missed forecasts of a 0.2% rise.

Meanwhile Core Retail Sales sustained their biggest drop in 16 months to 0.3%, according to the commerce department.

The pair of disappointing economic reports come ahead of the latest Federal Reserve policy decision. It's widely expected the central bank will raise rates for the second time this year, when it reveals its policy statement at 2pm ET.

According to investing.com's fed rate monitor tool, nearly 90% of traders expect the Fed to raise rates from 0.75-1% to 1-1.25%.

Traders are expected to closely monitor a press conference from Fed chair Janet Yellen, which is slated to begin shortly after the rate decision. As well as the progress of the U.S. economy, investors will be eager to receive an update on the central bank's plan to trim its $4.5 trillion balance sheet.

The slump in the dollar was most prevalent against the yen and euro, with USD/JPY down 0.74% to Y109.13 and EUR/USD up 0.53% to $1.1269.

Meanwhile, GBP/USD rose 0.36% to $1.2799, after a mixed UK employment report showed a drop in the in the number of unemployed people but wage growth unexpectedly fell last month.

USD/CAD traded at C$1.3219, down 0.19%, as the oil-linked Canadian dollar pared some of its gains achieved in the previous session, after oil prices came under pressure on the back of data showing U.S crude stockpiles fell by less than expected.

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