The U.S. dollar ticked up on Wednesday, recovering slightly from recent two-month lows, as markets awaited the Federal Reserve’s upcoming interest rate decision. Despite the modest gain, the greenback remained under pressure as investors priced in expectations of policy easing.
At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the currency against six major peers, rose 0.2% to 96.442, following a 0.7% decline on Tuesday to its lowest point since early July.
Eyes on the Fed
The Federal Reserve is widely anticipated to lower its benchmark rate by 25 basis points to a 4.00%-4.25% range at the conclusion of its policy meeting later today. Traders will closely monitor comments from Fed Chair Jerome Powell, which are expected to provide guidance on the trajectory of future rate adjustments.
Alongside the FOMC’s statements, the central bank will release its updated rate projections, known as the “dot plot,” which investors use to gauge the expected pace of monetary policy changes.
“The dollar has been selling off ahead of this event, but there are a few risks,” noted analysts at ING. “For example, we could see short-dated US rates back up a little and the dollar get a brief bid if the Fed Dot Plots continues to show just 50bp of rate cuts this year compared to the 70bp now priced.”
Euro and Sterling Show Minor Movements
In Europe, the euro slipped 0.2% to 1.1841 against the dollar after hitting a four-year high in the previous session. Eurozone inflation data, expected later today, is projected to show a 2.1% rise in August compared to 2.0% in July, broadly aligning with the European Central Bank’s target.
The ECB held interest rates steady last week but emphasized flexibility for future cuts amid uncertainty over trade, energy prices, and exchange rates. ING added, “We’d expect good demand for EUR/USD on any corrective dip to the 1.1750/1.1780 area during Powell’s press conference. Seasonality now builds against the dollar, especially in November and December, with 1.1910 likely the final resistance before 1.20 is reached.”
GBP/USD was slightly higher at 1.3636 after U.K. inflation held at 3.8% in August, nearly double the Bank of England’s target, indicating the BoE is likely to maintain current monetary policy on Thursday.
Other Currencies
The Japanese yen gave back some previous gains, with USD/JPY up 0.1% at 146.62. Data showed Japan’s trade deficit narrowed less than expected in August, with exports also falling less sharply thanks to a recent U.S. trade deal, though overall demand remained weak. The Bank of Japan is expected to keep rates unchanged at its upcoming meeting.
Meanwhile, USD/CNY edged down 0.1% to 7.1095, with the yuan supported by ongoing policy stimulus from Beijing, reaching its strongest level since November 2024. AUD/USD slipped 0.2% to 0.6671 following prior gains.
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