FOREX-Dollar gains before US CPI, sterling slumps

(Changes byline, adds quotes, updates prices)

By Naomi Tajitsu

LONDON, May 14 (Reuters) - The dollar rose broadly on Wednesday, building on gains made after robust U.S. retail data as more investors adopted the view that the Federal Reserve may be done with cutting interest rates, at least for now.

Sterling slumped to a near three-month low against the dollar after the Bank of England in its quarterly inflation report said that UK prices would shoot up this year, which many believe may delay interest rate cuts. Click on [ID:nBOE001421]

Inflation pressures remained a main theme in the market, and investors awaited the April U.S. consumer price index at 1230 GMT to glean more insight into whether the Fed will take a breather from aggressive rate cuts while it gauges the impact of past cuts on the broader economy.

U.S. interest rate futures showed the market has begun to price in the possibility that the Fed may even raise borrowing costs at the end of the year FEDWATCH, pushing Treasury yields higher and boosting the appeal of U.S. debt.

"An increase in U.S. bond yields reflects two things: a market perception that the Fed is on hold for now and the feeling that previous rate reductions together with current fiscal stimulus ... will help the U.S. economy," said Neil MacKinnon, chief economist at London-based hedge fund ECU Group.

"Both factors will help support the dollar."

The 10-year Treasury yield jumped near 4 percent, its highest since the start of the year <US10YT=RR>.