The US dollar remained relatively flat during the early European session following a weak performance on Tuesday, attributed to dovish comments from Federal Reserve Chair Jerome Powell. Despite a robust domestic jobs report, US bond yields declined. Powell’s remarks suggested that the US economy is on a “disinflationary path”, which put the greenback on the defensive. However, Powell reiterated the Fed’s stance on requiring comprehensive data before considering rate cuts, emphasising the central bank’s data-dependent approach.

The upcoming inflation readings will be crucial in shaping future US interest rate decisions. In May, US core consumer prices increased by 0.2% month-on-month, moderating from April’s 0.3% uptick and marking the slowest rise in seven months. If inflationary pressures continue to moderate in June, the dollar could continue to experience limited upside in the near term.

Market participants are anticipating up to two rate cuts from the Fed this year. This dovish stance could pressure Treasury yields to the downside. Furthermore, the release of the minutes from the Fed's June meeting later today is highly anticipated, as it could provide further insights into the Fed's current policy stance in addition to the PMI data, both of which could impact the US currency and yields.