The US Dollar remained near multi-week lows on Wednesday against the Euro and Sterling, as surprisingly soft US inflation data fuelled bets the Fed would not hike rates on the day.

The Dollar index – measuring the greenback against six peers – stayed flat at 103.20 after reaching an overnight low of 103.04, a level not seen since 22nd May.

The US consumer price index (CPI) registered its smallest year-on-year rise since March 2021 at 4.0% in April.

The likelihood of the Federal Reserve hiking rates by 25 basis points has fallen to under 5% from around 21% yesterday, as per the CME FedWatch Tool.

"Going into the meeting, the market is expecting a hawkish hold – unless they surprise us all and hike. It's quite a high hurdle for (the Fed) to deliver a hawkish surprise tonight through rhetoric alone," said MUFG strategist Lee Hardman.

"For us, we think we still can't completely rule out that the Dollar could at least try to rally initially on the back of hawkish comments from the Fed or from updates or projections," he added.

The Dollar index is on track for its largest fortnightly decline in two months, Reuters reports, after losing 0.8% in value over that time. Although the Fed may be nearing the end of its current rate hiking cycle, investors believe other central banks still have a way to go.

Furthermore, after moving away from a two-and-a-half-month low at the end of May, the Euro was flat at $1.0787 at the time of writing. It's widely forecast the European Central Bank will hike rates by 25 basis points to 3.50% this week.

"In terms of short-term impact, we expect the combination of a hawkish hold by the Fed and a hawkish 25-bp hike by the ECB to leave the Euro trading closer to $1.0700 than $1.0800," said ING strategist Francesco Pesole.

"The ECB may struggle more to convey a hawkish message after inflation and growth data came in on the softer side."

The Pound was also broadly flat on Wednesday at $1.2607 after rising 0.8% on Tuesday to a one-month high of $1.2625.