Investing.com – The U.S. dollar fell on Wednesday after hitting a four-week high the night before the Federal Reserve’s latest meeting.

At 04:10 ET (08:10 GMT), the dollar index, which tracks the dollar against a basket of six other currencies, was trading 0.4% lower at 104.775, after overnight hitting its highest level since May 14 on level 105.46.

The dollar is waiting for the Fed meeting

The dollar fell from recent highs but saw a stronger-than-expected rise in demand for the U.S. currency on Friday as investors retreat from expectations of Fed rate cuts this year.

With this in mind, all eyes will be on the release of key US data and the meeting, including up-to-date interest rate forecasts, later Wednesday.

May CPI is expected to rise just 0.1% during the month, representing an annual gain of 3.4% – still well above the Fed’s medium-term target of 2%.

The U.S. central bank is not expected to change interest rates this time, and investors will be curious to see whether Fed officials change their expectations for how many rate cuts this year.

“What can move the markets are two things. If the Fed removes the phrase “further progress toward the Committee’s 2 percent inflation target has been lacking in recent months,” short-term U.S. yields and the dollar could decline, ING analysts said in a note.

“Similarly, Chairman Powell typically holds dovish press conferences, and the dollar had fallen on this day for the past four consecutive FOMC meetings. The same thing could happen today.”

The UK economy did not grow in April

rose 0.1% to 1.2750 and sterling rose despite data showing the British economy showed no growth in April, largely due to soggy weather.

remained unchanged in April, after increasing by 0.4% month-on-month in March.

The data followed Tuesday’s labor market data, which showed a decline in employment and an raise in unemployment, while wages continued to grow strongly.

rose 0.1% to 1.0745 after data confirmed that inflation in Germany rose in May on higher prices for services.

harmonized compared to other European Union countries, increased by 2.8% in May compared to the previous year, compared to the 2.4% year-on-year raise recorded in April.

“We believe EUR/USD may find support from today’s events in the US. However, the 1.0800 level will now likely represent strong intraday resistance,” ING added

Japan’s PPI does little to support the yen

In Asia, trading rose 0.1% to 157.26, with little support for the yen from hotter-than-expected data that came just ahead of this week’s meeting.

The BOJ is scheduled to meet on Friday and is likely to leave interest rates unchanged. However, the central bank is expected to tighten policy further by reducing the pace of bond purchases.

fell slightly to 7.2538, remaining near six-month highs after mixed inflation data in China raised concerns about the country’s economic recovery.

It fell at its slowest pace in 15 months in May, but rose less than expected, barely staying out of dwindling territory.