US dollar index in bearish consolidation sub-97.00 ahead of dovish Fed hike

The US dollar index, the greenback when measured against a basket of six major currencies, resumed its bearish momentum in Wednesday’s European trading, following a temporary reversal seen in the US last session.

The USD bears fought back control and dragged the rates back below the 97 handle before consolidating the latest leg down near the 96.85 region. Markets await the FOMC verdict and the Statement of Economic Projections (SEP), due later today at 1900 GMT, for the next push lower.

The greenback got thrashed so far this week on the back of the increased expectations of a dovish Fed rate hike. It’s widely expected that the Fed will lift borrowing costs by 25bps to a range of between 2.25-2.50%, which would make it the fourth rate hike of this year.

However, mounting global economic slowdown worries combined with trade war risks and lower inflationary pressures, the Fed is likely to signal fewer rate hikes next year and could hint an earlier end to its monetary tightening. This is the main reason why the USD sellers continue to lurk, despite the recent rout in the global equity markets.

US dollar index Technical Levels