U.S. Dollar Extends Slide On Soft Inflation Data

The U.S. dollar extended its early weakness against other major currencies in the Asian session on Wednesday, as inflation slowed more than expected in April, raising hopes of further easing by the Federal Reserve.

Data from the Labor Department showed that consumer prices increased 2.3 percent year-on-year in April, following a 2.4 percent rise in March. Economists had expected inflation to remain unchanged.

On a monthly basis, the CPI rose 0.2 percent in April, up from a 0.1 percent decrease in March. Economists had forecast a 0.3 percent increase.

Weaker-than-expected inflation reading revived hopes for an interest rate cut by the Federal Reserve in the coming months.

Traders assess the impact a temporary US-China tariff war settlement, under which tariffs will be reduced to 30 percent and 10 percent, respectively, for a 90-day period. They also cautiously await trade deals with other major US trading partners.

Market investors are now awaiting the release of the U.S. Producer Price Index (PPI) and the University of Michigan's Consumer Sentiment Survey, which are both planned for later this week.

In the Asian trading today, the U.S. dollar fell to a 5-day low of 1.3320 against the pound, from yesterday's closing value of 1.3304. The greenback may test support near the 1.34 region.

Against the euro, the yen and the Swiss franc, the greenback dropped to 2-day lows of 1.1201, 147.01 and 0.8381 from Tuesday's closing quotes of 1.1186, 147.52 and 0.8396, respectively. If the greenback extends its downtrend, it is likely to find support around 1.13 against the euro, 143.00 against the yen and 0.81 against the franc.

Against Australia, the New Zealand and the Canadian dollars, the greenback slipped to a 1-week low of 0.6487, a 6-day low of 0.5950 and a 2-day low of 1.3920 from yesterday's closing quotes of 0.6472, 0.5936 and 1.3934, respectively. On the downside, 0.66 against the aussie, 0.60 against the kiwi and 1.37 against the loonie are seen as the next support levels for the greenback.

Looking ahead, Germany's final consumer prices for April is due to be released at 2:00 am ET in the pre-European session. Consumer price inflation is seen easing to 2.1 percent from 2.2 percent in March.

In the New York Session, U.S. MBA mortgage approvals data, Canada building permits data for March and U.S. EIA crude oil data are slated for release.

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