The US dollar steadied Wednesday ahead of key inflation data that could guide future Federal Reserve policy, after relatively hawkish comments from Fed Chair Jerome Powell.

At 04:15 ET (09:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally higher at 107.875, after recording some overnight losses, as traders stepped back from a tariff-driven rally in the greenback.

Dollar steadies ahead of US CPI

The day's main focus will be the publication of a key monthly reading of U.S. inflation later in the session, which could factor into how the Fed approaches monetary policy decisions this year.

Economists expect headline consumer prices grew at a rate of 2.9% year-on-year in January, matching December's pace, while the gauge is tipped to slow to 0.3% from 0.4% on a monthly basis.

The so-called core measure, which strips out volatile items like food and fuel, is seen slowing slightly to 3.1% from 3.2%, but quickening to 0.3% from 0.2% month-on-month.

This will be the last inflation reading before any direct impact from President Donald Trump's tariff measures, which went into effect this month.

"There is a sense of fatigue in some of the Trump trades, where this year's U-turns on tariffs have made it a lot harder to reach definitive conclusions," said analysts at ING, in a note. "At present, we are waiting to hear if 'reciprocal' tariffs are coming this week."

Trump's policies, including higher tariffs, are widely seen as potentially fueling inflation in the US, which could keep the Federal Reserve from easing monetary policy further any time soon.

Source: Investing.com