The dollar fell in European trade on Wednesday against a basket of major rivals, giving up five-week highs and on track for the first loss in four days on active profit-taking, while US 10-year treasury yields slowed down.

The decline comes ahead of an important and busy day in US markets, with US inflation data and policy decisions by the Federal Reserve.

The Index

The dollar index fell 0.15% to 105.13, with a session-high at 105.32.

The index rose 0.15% on Tuesday, the third profit in a row, marking a five-week high at 105.46.

US Treasury Yields

US 10-year treasury yields fell 0.4% today on track for the second loss in a row away from week highs at 4.479%, pressuring the dollar.

US Rates

According to the Fedwatch tool, the odds of a September 0.25% Fed rate cut stand at 52%, and the odds of such a cut in November stand at 67%.

While the Fed is expected to maintain interest rates unchanged at below 5.5%, it will issue important forecasts for interest rates and inflation this week.

The Fed is widely expected to reduce the number of expected rate cuts this year from three to two.

US Inflation

Later today, US consumer prices data will be released, expected to show an increase of 3.4% in May, while core prices are expected up 3.5%.

The Fed

The Federal Reserve is convening today and will issue its monetary policy decisions, with full expectations that the Fed will keep rates unchanged at 5.5%, the highest since 2001.

The meeting is expected to provide important clues on future steps of the worlds largest central bank, and the number of expected US interest rate cuts this year.