European session review: USD weakens as investors await U.S. key inflation data

USD fell against its major rivals in the European session on Wednesday as investors awaited the Labor Department's report on the U.S. consumer prices in May, set to be released on Thursday. 

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.11% to 89.98.

It is expected that the May inflation readings may provide hints on the time frame for Fed paring back its bond-buying program and the prospects of interest rate hikes in the U.S. The Federal Reserve's policymakers have continued to reassure that any jumps in inflation as the U.S. economy rebounds from the COVID-19 pandemic will be transitory. Economists forecast the headline CPI rose 4.7% y/y in May, following a 4.2% climb in the previous month that was the highest in nearly 13 years. The fear is that if the economy runs too hot and inflation runs too high the Fed’s policymakers may start tightening sooner than expected.

Meanwhile, market participants assessed the data from China, which showed that factory gate prices in the country climbed  9% y/y in May, the fastest pace since September 2008.