The US dollar strengthened against major currencies at the start of the week in volatile trading ahead of a week packed with central bank meetings, including key decisions from the Fed.
The market is almost certain that the Fed will cut interest rates, but investors remain wary of possible signals that the easing cycle may be slower than expected.
At 9.50 am, the US Dollar Index (DXY) which measures the US dollar was at 99.038 points, down 0.06% since it opened in early trade on Tuesday in the Asian session.
In addition to the Fed, the central banks of Australia, Brazil, Canada and Switzerland also hold rate-setting meetings this week, although no policy changes are expected from any of the institutions.
Analysts expect the Fed to cut rates this week while signaling caution, based on economic forecasts and statements from Chairman Jerome Powell.
This approach suggests the Fed wants more solid evidence before making additional cuts.
The Federal Open Market Committee (FOMC) is expected to cut its benchmark interest rate by 25 basis points to a range of 3.50%–3.75% early Thursday morning, marking the third straight easing meeting.
The move could support the dollar if it leads investors to reduce expectations for two or three more rate cuts next year, although the policy message could be mixed due to differences in views among Fed officials.
While the labor market is showing signs of weakness, overall economic growth remains strong. The stimulus from Trump’s “One Big Beautiful Bill” is expected to start trickling into the economy, while inflation remains well above the central bank’s 2% target.
