US Dollar Index moves lower near 98.50, awaiting Fed Monetary Policy Report
The US Dollar Index (DXY), which measures the US Dollar (USD) against a basket of six major currencies, extended its decline for the second straight day and traded lower around 98.70 at the time of writing. Traders are likely to gauge the Fed Monetary Policy Report, which is scheduled to be released on Friday. The Federal Reserve Board will submit a report to Congress containing a discussion of “the conduct of monetary policy and economic developments and prospects for the future.”
The US dollar may have strengthened again due to rising safe-haven demand, driven by growing concerns over potential US involvement in an Israel-Iran air war. US intelligence agencies believe that Iran has not yet decided whether to pursue nuclear weapons, despite having developed a large stockpile of enriched uranium needed to make a bomb, a senior US intelligence source said, according to The New York Times.
However, the report also indicated that Iran could switch to bomb production if the US military strikes Iran’s Fordo uranium enrichment site, or if Israel assassinates Iran’s supreme leader, Ayatollah Khamenei. The chairman of the US Senate Intelligence Committee noted that President Trump will give Iran a final chance to make a deal to end its nuclear program. Trump is likely to delay his final decision to launch an attack by up to two weeks.
The greenback was supported by cautious remarks from Federal Reserve (Fed) Chairman Jerome Powell in his post-meeting press conference on Wednesday. Powell noted that inflation remains slightly above target and could rise in the future. He highlighted the importance of the current policy stance that keeps the central bank in a good position. He warned that ongoing policy uncertainty will keep the Fed on hold.
The US Federal Reserve (Fed) announced that it will keep interest rates unchanged at 4.5% in June as widely expected. However, the Federal Open Market Committee (FOMC) still sees about 50 basis points of rate cuts by the end of 2025. (alg)
Source: FXstreet
