Dollar Pause Ahead of Hawkish Hike Decision
The US dollar extended its advance against major currencies on Tuesday but slowed down slightly today as investors are hesitant to hold large positions ahead of the Federal Reserve's (Fed) decision later today.
According to Fed funds futures, there is a 90% chance of a 25bps rate increase, with another same-sized hike fully priced in for December. By the end of next year, around 95bps worth of rate hikes are expected.
While a rate hike is anticipated, investors will focus on the updated dot plot and new forecasts following the decision. The spotlight will be on Fed Chair Kevin Warsh to see if he remains hawkish despite pressure from US President Trump over monetary policy.
The Bank of England (BoE) and Bank of Japan (BoJ) decisions are also crucial this week, with the BoE expected to keep rates on hold tomorrow, and the BoJ seen increasing interest rates by 80% on Friday.