Dollar Sells Off Despite Hawkish Fed Vote

The US Dollar Index sold off despite expectations of hawkish monetary policy from the Federal Reserve. The DXY index printed a session low just above 101.00, down four tenths of a point from its high near 101.50. This move came after the Fed held interest rates at 3.50% to 3.75%, with three dissenting votes for an immediate quarter-point increase.

The hawkish vote was seen as a surprise and should have bid up the dollar, but instead it fell sharply. The futures market had priced in more than a third of a hike into the decision, which suggests that the hold was a disappointment to investors who were looking for more aggressive action from the Fed.

The Chair's press conference at 18:30 GMT is where the markets will look for direction and clarity on monetary policy. The statement blames energy and other supply shocks for elevated inflation, but three voters see these same shocks as grounds to move now.