The U.S. dollar gained slightly on Wednesday as investors positioned ahead of the Federal Reserve’s anticipated interest rate announcement, though it remained under pressure after recent losses.
By 04:10 ET (08:10 GMT), the Dollar Index, which measures the greenback against six major currencies, was up 0.2% at 96.442, following a 0.7% drop on Tuesday that marked its lowest level since early July.
Focus on the Fed
The Federal Reserve is expected to cut its benchmark interest rate by 25 basis points to a 4.00%-4.25% range at the end of its policy meeting. Market participants are watching Fed Chair Jerome Powell’s comments closely for hints on the central bank’s future rate strategy.
The Fed will also release its updated “dot plot,” detailing policymakers’ projections for upcoming rate moves. Analysts at ING noted, “The dollar has been selling off ahead of this event, but there are a few risks. 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 Drift
In Europe, the euro dipped 0.2% to 1.1841 against the dollar, after climbing to a four-year high in the previous session. Eurozone consumer price inflation for August is expected to show a 2.1% year-on-year increase, slightly above July’s 2.0% but still in line with the ECB’s target.
The European Central Bank recently kept rates unchanged but flagged uncertainty around trade, energy costs, and exchange rate volatility, leaving the door open for future adjustments. ING analysts 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 inched up 0.1% to 1.3636 after U.K. inflation remained at 3.8% in August, nearly double the Bank of England’s target, indicating policy is likely to stay on hold at Thursday’s meeting.
Other Major Currencies
USD/JPY rose 0.1% to 146.62, reversing part of Tuesday’s losses. Japan’s trade deficit narrowed less than expected in August, with exports also falling less than forecast, though domestic demand remains weak. The Bank of Japan is widely expected to maintain its current rates.
USD/CNY ticked down 0.1% to 7.1095 as the yuan was bolstered by ongoing stimulus measures from Beijing, reaching levels not seen since November 2024. AUD/USD fell 0.2% to 0.6671, retracing gains from earlier sessions.
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