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Dollar Edges Lower as Fed Comes Into Focus

Investing.com – The U.S dollar fell against its rivals Monday as the pace of U.S. inflation undershot economists' forecasts and strengthened expectations that the Federal Reserve will leave rates unchanged when it delivers its monetary policy decision later this week.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.12% to 97.60.

The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, slowed to 1.8% in the 12 months through March, missing economist estimates for a 1.7% rise.

The inflation data further "raises the bar" for how much strength Federal Reserve officials will need to see in the economy before making a move, Hedge Fund Economics said.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.9% last month, the Commerce Department said on Monday.

The duo of reports came a day ahead of the Federal Open Market Committee's two-day meeting, which is expected to result in a decision to leave its key federal funds rate unchanged. The FOMC, the Fed's rate-making body, is currently targeting the rate at 2.25% to 2.5%. But much attention will center on Fed Chairman Jerome Powell's press conference after the rate decision is announced.

The greenback's gloomy start to the week was exacerbated by a rise in the euro heading into Tuesday's preliminary consumer price index figures from the major European Union countries. The single currency was also supported by reassuring comments from credit agency S&P Global (NYSE:SPGI) concerning Italy's credit rating.

"A severe downgrade (of Italy) not very likely," said S&P Global analyst Frank Gill said during a webcast. "I would suggest the rating (of Italy) is already quite low given the wealth of the economy and given the very strong net external position."

EUR/USD rose 0.27% to $1.1180.

GBP/USD rose 0.12% to $1.2932 amid reports cross-party talks between U.K. lawmakers on Brexit had been "productive" and "constructive," according to the BBC.

USD/JPY rose 0.18% to Y111.79 as tentative risk-on sentiment stifled demand for safe-haven yen.

USD/CAD fell 0.06% to C$1.3445.

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