The Dollar declined to a one-month low against the Euro on Wednesday as traders prepared for a key US inflation report that may determine the Federal Reserve’s policy trajectory.

Meanwhile, the Japanese yen remained close to a fortnight-low as the yield gap between local and US bonds continued to urge yen selling.

At the time of writing the Euro rose 0.03% to $1.0823 and previously edged up to $1.0828 for the first time since 10th April, Reuters reports.

The Dollar index, measuring the currency against six major peers, declined 0.11% to 104.94 after falling to a one-and-a-half-week low of 104.92 earlier.

Additionally, the long-term US Treasury yield benchmark decreased slightly to 4.4414%, continuing an overnight retreat of 3.5 basis points.

According to a Reuters poll, Wednesday's report on core consumer prices is anticipated to indicate that the Consumer Price Index (CPI) increased by 0.3% month-on-month in April, a fall from the 0.4% growth observed the month before.

“The market is going to sink or swim together,” said Deutsche Bank strategist Alan Ruskin, highlighting the “extremely rare” concentration of analysts' forecasts at 0.3%.

He added that rate path forecasts are “a little more sticky than usual,” and it would take more than just a single modest upside or downside surprise to significantly impact the markets.

That said, should there be “a large upside miss” of 0.5% or more, “early thoughts of the next move possibly being a hike would create a very large scale repricing of rates and a major USD surge against all currencies,” he continued.

Furthermore, although the Dollar weakened against most currencies overnight, it continued to strengthen against the Yen.

On Wednesday, the Dollar slightly retreated by 0.12% to 156.245 Yen, after reaching as high as 156.80 overnight. 

The Dollar's rise to a 34-year high of 160.245 Yen on 29th April prompted two rounds of substantial Yen buying, suspected by traders and analysts to be orchestrated by the Bank of Japan (BOJ) and the Japanese finance ministry.

“The BOJ will hope that tonight's US CPI release is in line with expectations to avoid the need for a difficult conversation tomorrow about when the appropriate time is to commence a third round of intervention - mindful that the past two rounds have yet to turn around the Yen's fortunes,” said IG analyst, Tony Sycamore.