US Dollar Index Holds Near 98.70 as Markets Await Fed Rate Decision

US Dollar Index Hovers Near 98.70 Ahead of Fed Interest Rate Decision

The US Dollar Index (DXY) is trading steadily around 98.70 during the early Asian session on Wednesday, reflecting investor caution ahead of the Federal Reserve’s June policy announcement.

With markets widely anticipating that the Fed will hold interest rates steady, all eyes are on the accompanying Federal Open Market Committee (FOMC) statement for forward guidance, particularly amid rising geopolitical tensions and economic uncertainty.

Traders Brace for Fed Forward Guidance

According to recent forecasts, there is now an 80% chance of a rate cut in September, followed by a possible second cut in October. These expectations are largely driven by sluggish economic indicators and growing global uncertainty, including tariff-related risks and instability in the Middle East.

Reuters reports increasing market bets on a September rate cut, despite the Fed’s likely decision to pause in June.

Weaker US Economic Data Pressures the Greenback

Recent data released by the US Census Bureau on Tuesday showed that Retail Sales declined 0.9% in May, a sharper drop than the anticipated 0.7% decline. Additionally, Industrial Production fell by 0.2%, reversing from the prior month’s 0.1% growth and undercutting forecasts.

This weaker-than-expected economic performance is limiting the upside for the US Dollar, despite its safe-haven appeal during times of uncertainty.

Outlook: Sideways Dollar Movement Until Fed Clarity

Until the Fed’s statement is released, limited volatility is expected in the Dollar Index. The central bank’s tone regarding inflation, growth, and future rate paths will play a key role in determining USD direction in the coming weeks.

Suggested Internal Links (Tredu.com):

• Understanding the US Dollar Index (DXY)
• What to Expect from the Federal Reserve in 2025
• Impact of Retail Sales on Forex Markets
• How Interest Rate Expectations Move Currency Markets