Dollar Rises Slightly Ahead of Fed
The US dollar edged higher on Wednesday, rebounding from a two-month low ahead of the Fed's interest rate decision. At 4:10 AM ET (8:10 AM GMT), the Dollar Index rose 0.2% to 96.442 after falling 0.7% the previous day to its weakest level since early July. This rise reflects market repositioning rather than a major trend change.
The market's primary focus is on the FOMC decision, which is expected to cut interest rates by 25 basis points to a range of 4.00%–4.25%. Beyond that, the tone of Jerome Powell's statement and the release of the "dot plot" will determine the next direction. ING analysts cautioned against the risk: if the dot plot continues to signal only a 50-bps cut this year (vs. the ~70 bps already priced in), US short-dated notes could rise and the dollar could find temporary support.
In Europe, EUR/USD fell 0.2% to 1.1841 after rallying to a four-year high in the previous session. The market is awaiting Eurozone CPI, which is expected to rise 2.1% year-on-year in August, slightly above last month's 2.0% but still close to the ECB's target. The ECB is keeping interest rates steady, while keeping the option of a cut open if the outlook worsens. ING sees the 1.1750–1.1780 area as a buy zone on a correction, with 1.1910 as key resistance before 1.20.
In Asia, USD/JPY rose 0.1% to 146.62 after weakening sharply yesterday. Japan's trade balance contracted less than expected, exports fell but not as sharply as expected, while weaker imports indicate domestic demand remains fragile. Ahead of the BOJ meeting, interest rates are expected to remain unchanged. USD/CNY fell 0.1% to 7.1095, supported by Beijing's promise of further stimulus—pushing the yuan to its strongest level since November 2024.
Risk-linked commodities also moved cautiously: AUD/USD weakened 0.2% to 0.6671 after rallying in recent sessions. In essence, the currency market is in a wait-and-see mode awaiting the Fed's announcement. Powell's tone, the interest rate map (dot plot), and Eurozone CPI data will be the triggers for the next direction—whether the dollar continues its relief bounce or comes under pressure again if policy easing signals are more dovish than expected. (ayu)
Source: Bloomberg.com
