The US dollar edged up as European trading got underway but remains close to the lows of the previous session. After a strong recovery that began at the end of January, mainly driven by the fading of dovish Federal Reserve expectations following the outbreak of the war in Iran and the inflationary pressures triggered by the energy shock caused by the closure of the Strait of Hormuz, the greenback has been on the back foot since Monday. Currency traders are now focused on the FOMC meeting, which concludes today. In particular, the economic and interest rate projections, along with the policy statement and the press conference with Jerome Powell, will be closely scrutinised by investors seeking to understand how the Iran conflict has affected policymakers’ sentiment at the Federal Reserve. The dollar gains of the past few weeks are the result of shifting market expectations for rate cuts in 2026, which have receded from three at the beginning of the year to just one, potentially as late as December. Against this backdrop, traders will be keen to assess the extent to which the inflationary risks currently priced into the US dollar align with the views expressed later today following the Federal Reserve’s FOMC meeting.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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