The dollar index (DXY00) Wednesday fell by -0.43%. The dollar erased an overnight rally and turned lower after Wednesday’s Fed-friendly US May CPI report bolstered expectations for the Fed to cut interest rates later this year. Also, the wider-than-expected US May federal budget deficit was bearish for the dollar since it implies that more capital needs to be imported to cover the budget deficit. In addition, Wednesday’s drop in T-note yields weakened the dollar’s interest rate differentials. The dollar on Wednesday initially moved higher after US-China trade talks ended with a plan to revive the flow of sensitive goods.
US May CPI rose +2.4% y/y, right on expectations. May CPI ex-food and energy rose +2.8% y/y, unchanged from April and a smaller increase than expectations of +2.9% y/y.
