The US dollar weakened in the middle of the trading week after a better-than-feared inflation report. While the US financial markets have hardly reacted to the data, the greenback trended lower following the numbers. But can the buck take advantage of investors shrugging the consumer price index (CPI) for April?

According to the Bureau of Labor Statistics (BLS), the annual inflation rate slowed to 4.9% in April, down from 5% in March. This was slightly lower than economists’ expectations of 5%. It also represented the first time that the year-over-year CPI came in below 5% in about two years.

But the CPI rose 0.4% month-over-month, up from 0.1% in the previous month.

The core annual inflation rate remained sticky at 5.5%, down from 5.6%, and matched market estimates. The core CPI rose 0.4% month-over-month, unchanged from March.

“Optimism for the disinflation process to remain in place is high as this report showed shelter prices remain elevated, which just means the lag we are seeing with rent prices should start meaningfully show over the few months,” said Ed Moya, senior market analyst at Oanda. “Inflation should continue to decline over the next few months, but falling back to 2% will be a lot harder given the strength in the labor market.”

In other economic data, mortgage applications soared 6.3% for the week ending May 5, up from the 1.2% decline in the previous week, according to the Mortgage Bankers Association. This was supported by a tepid drop in the 30-year mortgage rate, which clocked in at 6.48%.

The US Treasury market was red across the board, with market analysts anticipating the Federal Reserve to slash interest rates, despite officials dismissing this move. The benchmark ten-year yield fell seven basis points to 3.45%. The one-month bill shed 2.1 basis points to 5.514%, while the 30-year bond dropped 4.3 basis points to 3.806%.

The US Dollar Index (DXY), which measures the greenback against a basket of currencies, tumbled 0.16% to 101.44, from an opening of 101.62.

The USD/CAD currency pair dipped 0.03% to 1.3381, from an opening of 1.3385, at 14:49 GMT on Wednesday. The EUR/USD surged 0.1% to 1.0973, from an opening of 1.0962.