The dollar fell in European trade on Wednesday away from recent five-week highs on profit-taking while US treasury yields stalled.

Even as inflationary pressures receded clearly, markets still await more decisive clues on the path ahead for US interest rates.

The Index

The dollar index fell 0.7% today to 100.27 with a session-high at 101.02.

On Tuesday, the index lost 0.85% on profit-taking away from a five-week high at 101.98.

US Yields

US 10-year treasury yields fell 0.7% tiday away from a five-week high at 4.505%, thus pressuring the greenback.

Trade Tensions

The US said itll reduce tariffs on low-cost Chinese shipments, worth less than $800, to 30%, reducing the severity of the trade war even further.

On Monday, President Trump said he doesnt expect tariffs on Chinese goods will return to 145% after the 90-day pause, adding he expects to reach a final deal with Beijing.

US Rates

Recent US inflation data missed estimates, showing reduced inflationary pressures on Fed policymakers.

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in June stood at just 8%, and the odds of such a cut in July stood at 40%.

Traders are now pricing in 50 basis points of US interest rate cuts this year, likely starting next September.

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