FX.co ★ Dollar Trades Sideways Ahead of Fed

The dollar index hovered around 99.6 on Wednesday, trading largely sideways as investors awaited the FOMC decision later in the day. While the Fed is widely expected to keep the federal funds rate unchanged, markets will be scrutinizing its forward guidance and the latest economic projections. This meeting will also be the first chaired by Kevin Warsh, prompting questions over whether he will submit a “dot” in the FOMC’s quarterly Summary of Economic Projections, which sets out policymakers’ expectations for the future path of interest rates. Futures markets are currently pricing in at least one 25bps rate hike this year, though those expectations have softened slightly following reports of an interim US–Iran peace deal. That announcement triggered a sharp drop in oil prices and briefly eased concerns about inflationary pressures. Earlier this week, the BoJ raised its policy rate by 25bps. The BoE will announce its monetary policy decision tomorrow, with no change in borrowing costs anticipated.