The dollar index fell 0.35% on Wednesday as Tuesday's risk-off flows into the haven U.S. currency and yen retreated initially, shifting the focus back on expectations H2 Fed rate cuts will be coming before peaks in ECB and BoE rate hikes.

Trading remains volatile due to elevated uncertainty about the U.S. and global economic outlook, geopolitical tensions and what the regulatory responses to the U.S.
banking crisis will be.

EUR/USD reversed from Wednesday's early intraweek lows at 1.0960 on EBS to a 13-month peak at 1.1096 as the tide went out on Tuesday's safe-haven flows, with pricing finishing about 0.59% higher after a rebound in Treasury yields trimmed earlier gains.

As stands, the Fed remains favored to hike rates 25bps next week, followed by at least two 25bp cuts by year-end.
The May 4 ECB meeting is fully priced for a 25bp hike, with a 1-in-5 chance of 50bps, followed by two more 25bp hikes by September and no real rate cuts expected until 2024.

That as euro zone inflation swaps remain above U.S. swaps with ECB rates much further below core inflation readings than the Fed's.

Sterling has come well off its highest since April 14's 10-month peak at 1.2545, and still gained 0.4% on Wednesday.

Though higher BoE than Fed rate hiking expectations support prices, sterling's uptrend looks less robust than EUR/USD's.
That as UK overall inflation at 10.1% looks pernicious.

USD/JPY rebounded from its 133.00 low to a 133.94 session high on EBS, as Treasury yields ricocheted higher before falling back as angst regarding First Republic Bank replaced early talk of buyers looking at the troubled lender.

Prices remain under pressure, with the 38.2% and 100-DMA key props by Wednesday's lows.

Late equity market and oil weakness raise the specter of renewed yen and dollar demand and selling of high beta pairs, such as AUD/USD, unless upcoming U.S. data reduces recession fears.

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