Jan 15 (Reuters) - The dollar was mixed and U.S. Treasury yields slid on Wednesday after data showed core U.S. consumer inflation slowing, convincing investors that the Fed could cut rates this year.

Treasury 2-year yields fell to 4.26%, unraveling gains since Friday’s strong U.S. payrolls report.

A bevy of Federal Reserve officials said the data shows U.S. inflation was continuing to ease though uncertainty remains about the incoming Trump administration's policies.

Chicago Federal Reserve Bank President Austan Goolsbee was optimistic for a continued economic soft landing in 2025 and Federal Reserve Bank of New York President John Williams said the notable rise in U.S. bond yields does not reflect a big change in the market’s inflation views.

U.S. December retail sales and weekly jobless claims reports are risks Thursday.

USD/JPY fell to its lowest level since the December Fed meeting and was on pace for its biggest drop since November due to converging U.S.-Japan yield differentials. Consensus has moved toward a Bank of Japan rate hike in January after BOJ Governor Ueda comments on Tuesday.

USD/JPY dip buyers emerged just below 156 as U.S. shares advanced and yields steadied. One-week option skews remain bid for yen calls ahead of Monday’s U.S. presidential inaugeration.

EUR/USD gave up post-data gains, stalling near its 21-DMA of 1.0350 as euro crosses were pressured and dollar selling slowed.

German-U.S. spreads tightened with bund yields finishing little changed.

European Central Bank vice president Luis de Guindos said the bank will continue cutting rates if inflation eases as expected but it needs to be prudent in the face of risks from trade tensions to debt worries.

The pound held on to a modest gain as a report that annualized British inflation slowed to 2.5% in December helped stabilize a jittery gilt market.

Bank of England policymaker Alan Taylor said the central bank should move quickly to bring down interest rates given signs of a slowdown in Britain's economy. GBP/USD has been orbiting 1.22 for three days as very bearish option skews for sterling ease.

Commodity currencies outperformed most other G10 peers amid a broad rally in commodity prices and gains in U.S. equities. Treasury yields were down about 9-11 basis points across tenors. The 2s-10s curve was up about 3 basis points to +38.9bp.

The S&P 500 surged 1.8% fueled by lower yields.

Oil was up nearly 3% after a weekly EIA inventory draw and ongoing concners about Russian supply.

Gold rose 0.63% and copper rose 1.22% on lower USD and yields.

Heading toward the close: EUR/USD -0.17%, USD/JPY -0.90%, GBP/USD +0.08%, AUD/USD +0.54%, DXY -0.14%, EUR/JPY -1.05%, GBP/JPY -0.82%, AUD/JPY -0.41%.

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(Editing by Burton Frierson Reporting by Robert Fullem)

((robert.fullem@thomsonreuters.com;))