By Konstantinos Chrysikos,Head of Customer Relationship Management at Kudotrade
The dollar edged lower on Wednesday, erasing Tuesday’s gains, and remained confined to a consolidation range as investors awaited the Federal Reserve’s policy decision and updated economic projections.
Markets widely expect a rate cut today, alongside projections pointing to two additional reductions in 2026. However, expectations could change drastically in reaction to Chair Jerome Powell’s tone at the press conference and the updated dot plot.
Bond investors were also cautious ahead of the Fed decision, driving prices lower; 10-year Treasury yields rose to near 4.2%, and could remain exposed to the impact of the Fed decision.
At the same time, Tuesday’s data offered mixed signals on the labor market. Job openings rose in October to 7.67 million, marking a second straight upside surprise versus expectations. Meanwhile, layoffs were on the rise, supporting interest rate cut expectations.
If monetary policy expectations remain dovish, the dollar could be under pressure as other major currencies see more strength. The euro in particular could see a more stable rate outlook, which would contrast with that of the US currency.