By Harry Robertson and Ankur Banerjee

LONDON/SINGAPORE (Reuters) – The greenback fell to a two-month low on Thursday after information confirmed U.S. inflation slowed sharply in March, bolstering hopes that the Federal Reserve’s rate-hiking marketing campaign is both already completed or will probably be by Could.

Figures launched on Wednesday confirmed that client value index (CPI) inflation got here it at 5% year-on-year in March, down from 6% in February.

But core inflation – which strips out unstable meals and power costs – picked as much as 5.6%, from 5.5% the earlier month.

The greenback dropped after the info was launched and weakened additional on Thursday, serving to the euro rise 0.27% to a two-month excessive of $1.102.

The , which measures the dollar in opposition to six main peer, was final down 0.2% at 101.28, its lowest for the reason that begin of February. It was on monitor for its fifth straight weekly drop.

John Hardy, head of FX technique at Saxo Financial institution, mentioned the inflation information “left the market with not a lot to go on”. He mentioned he expects the greenback to grind decrease from right here as inflation cools and the economic system slows.

“It encourages greenback weak point, so long as we do not get a significant recession or a significant reheating,” Hardy mentioned. “Nothing huge, we’re simply searching for an extension of the weak point.”

AGGRESSIVE HIKES

The greenback index has dropped nearly 12% since touching a 20-year excessive of 114.78 final 12 months, after being pushed up by the Federal Reserve’s aggressive rate of interest hikes, which made dollar-denominated bonds look engaging.

(Graphic: Greenback index – https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdjjkkpm/Screenshotpercent202023-04-13percent20082159.png)

The sharp slowdown in U.S. inflation in 2023 has brought about many buyers to hope that the Fed’s charge hikes may quickly be over, though the stubbornness of core inflation is inflicting others to query that narrative.

Minutes from the Fed’s March assembly, additionally launched on Wednesday, confirmed that a number of officers thought-about pausing rate of interest hikes after the failure of Silicon Valley Financial institution. The Fed ended up climbing by 25 bps to a variety of 4.75% to five%.

Pricing in derivatives markets reveals merchants assume there is a roughly 70% probability the Fed raises charges 25 bps once more in Could, and a 30% probability it does nothing.

In opposition to Japan’s yen, the greenback slipped 0.19% to 132.93, after falling 0.39% within the earlier session.

New Financial institution of Japan Governor Kazuo Ueda on Wednesday indicated he was involved about tightening financial coverage too early and failing to push inflation sustainably to 2%.

Britain’s pound was up 0.22% to $1.251, in its third straight day by day acquire.

Information on Thursday confirmed that the British economic system stagnated in February as strikes by public-sector employees hit output.

In the meantime, the greenback fell to a 26-month low in opposition to the Swiss franc at 0.891, down 0.5% on the day. The franc is historically seen as a secure haven at instances of stress.

The Australian greenback rose 0.59% to $0.673.