- The US Dollar Index (DXY) gathers strength around 103.88 in Wednesday’s early European session.
- The US Fed is likely to leave the interest rate unchanged for a fifth straight time at its March meeting on Wednesday.
- The sticky inflation and strong labor market data in the US indicated the US might delay the rate cut cycle.
- Traders await the Fed interest rate decision and the press conference on Wednesday.
The US Dollar Index (DXY) trades on a positive note for the fifth straight day near multi-week highs during the early European session on Wednesday. The upside of the US Dollar is supported by the growing speculation that the Federal Reserve (Fed) will maintain its high-for-longer interest rate narrative as inflation in the US remains elevated. Investors await the Fed monetary policy meeting and press conference on Wednesday for fresh catalysts. At the press time, the DXY is trading at 103.88, gaining 0.06% on the day.
The US Fed is expected to leave the interest rate unchanged in a range of 5.25% to 5.5% at its March meeting on Wednesday. The financial markets believe the first rate cut will most likely be in June, but it could be as late as July. After the meeting, traders will closely watch Fed Chair Powell’s press conference, which might provide insight into the timing and the number of rate cuts to expect in 2024. The hawkish remarks from the Fed might provide some support for the US Dollar in the near term.
The US economic data in recent weeks suggested that inflation in the US is easing from its peak levels, but still above the 2% target. Additionally, the strong labor market data indicated the US would not need to cut rates to prevent a recession. Fed Chairman Jerome Powell stated that lowering the interest rate too early might trigger an upsurge in inflation and cause more pain for consumers. The Fed is expected to stick to its forward guidance, emphasizing that it needs more evidence that inflation is on a sustainable path towards its 2% objective before cutting rates.
Looking ahead, market participants will closely monitor the Fed interest rate decision later on Wednesday, along with the press conference and a Summary of Economic Projections, or ‘dot-plot’. On Thursday, the preliminary US S&P Global PMI data for March will be due. Traders will take cues from these events and find trading opportunities around the US Dollar Index.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to marginal gains above 1.0750
EUR/USD trades in positive territory above 1.0750 in the second half of the day on Monday. The US Dollar struggles to find demand as investors reassess the Fed's rate outlook following Friday's disappointing labor market data.
GBP/USD edges higher toward 1.2600 on improving risk mood
Following Friday's volatile action, GBP/USD pushes higher toward 1.2600 on Monday. Soft April jobs report from the US and the modest improvement seen in risk mood make it difficult for the US Dollar to gather strength.
Gold rebounds above $2,310 as US yields push lower
Gold price trades in positive territory above $2,310 in the American session on Monday. The benchmark 10-year US Treasury bond yield stays in the red below 4.5% after weaker-than-expected US employment data, helping XAU/USD hold its ground.
Addressing the crypto investor dilemma: To invest or not? Premium
Bitcoin price trades around $63,000 with no directional bias. The consolidation has pushed crypto investors into a state of uncertainty. Investors can expect a bullish directional bias above $70,000 and a bearish one below $50,000.
Week ahead: BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.