The Dollar Weakens Ahead of Federal Reserve Meeting
The dollar remained on the back foot against major rivals as traders awaited the conclusion of a Federal Reserve policy meeting and hints about potential interest rate cuts. The U.S. currency edged lower to 145.385 yen and was slightly down against the euro at $1.0798. The dollar index, which measures the dollar against several currencies, held steady at 103.82.
Fed Chair Jerome Powell’s Remarks in Focus
Investors are eagerly anticipating updated economic and interest rate projections from Fed officials after their meeting. They will pay close attention to Fed Chair Jerome Powell’s remarks regarding potential interest rate cuts in the first half of 2024.
If Powell pushes back against rate cut expectations, the dollar index may have an opportunity to rebound. Currently, traders have priced in a quarter point rate cut in May.
Upcoming Central Bank Decisions
This week, central banks including the European Central Bank, Bank of England, Norges Bank, and the Swiss National Bank will also make policy decisions. Norway is the only one that could potentially raise rates, while there is a risk that the Swiss National Bank could reduce its support for the franc in foreign exchange markets.
The Bank of Japan’s policy meeting is scheduled for next week, and there has been speculation about the central bank ending its negative rate policy. However, Bloomberg reported that BOJ officials see little need to rush to the exit.
Cryptocurrency Market Consolidation
Bitcoin continued to consolidate around $41,350 after reaching its highest level since April 2022 at $44,729 last Friday.
Hot Take: Dollar Vulnerable to Fed’s Policy Outlook
The dollar is facing vulnerability as traders await the Federal Reserve’s policy outlook. The outcome of the meeting and Fed Chair Jerome Powell’s comments will greatly impact the market’s expectation of potential interest rate cuts. If Powell signals a pushback against rate cuts, the dollar may have a chance to rebound. Additionally, upcoming central bank decisions from major economies and the ongoing consolidation in the cryptocurrency market contribute to the overall uncertainty in the global financial landscape.
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