The U.S. dollar rose slightly on Wednesday as investors awaited the Federal Reserve's interest rate decision, which is expected to be Jerome Powell's last in his role as Chair. Meanwhile, the war with Iran continues without clear signs of a near-term resolution.

Market activity was relatively thin due to a public holiday in Japan and general caution ahead of several central bank decisions over the next 48 hours. Investors are also bracing for major earnings reports from Amazon, Microsoft, and Meta, scheduled after Wednesday's closing bell.

The Euro fell 0.07% to 1.1705 dollars, while the British pound dropped 0.05% to 1.3513 dollars, both moving further away from their highs reached earlier this month. The Euro is currently trading approximately 1% below its level at the end of February when the war broke out, while the pound has remained largely unchanged.

The Federal Reserve's decision will dominate the headlines later today. While a rate hold is widely anticipated, markets are focused on how policymakers assess the war's impact on the economy and the future of Jerome Powell within the central bank.

Carol Kong, a currency analyst at Commonwealth Bank of Australia, noted: "The question is what Powell will do, as he remains a member of the Board of Governors until 2028. Will he resign after his term as Chair ends, or will he stay on and play a role similar to a 'shadow chair'?" She added that Powell previously indicated he would stay if he felt the Fed's independence was threatened, meaning his decision will likely depend on his assessment of that situation.

On the geopolitical front, efforts to end the war with Iran have reached an impasse. President Donald Trump expressed dissatisfaction with Tehran's latest proposal, demanding that the nuclear file be addressed from the outset.

Oil prices rose for the eighth consecutive day, marking the longest winning streak since May 2022 following the Russian invasion of Ukraine. The June contract—expiring Wednesday—rose 1% to 112 dollars per barrel, while the more active July contract recorded 105 dollars. This surge has dampened market confidence and supported safe-haven demand for the dollar.

Derek Halpenny, head of global markets research at MUFG, said: "With oil trading back above 110 dollars, the risk of more severe economic consequences during the summer is increasing." He added that Europe and Asia would be the most affected, and if the situation persists, the Euro and Asian currencies could face further downward pressure.

### Yen Under Pressure and Intervention Watch

The Japanese yen stabilized just below the 160 level against the dollar, despite hints from the Bank of Japan following its recent meeting that a rate hike is strongly possible in the coming months.

The yen was last at 159.63 per dollar, unchanged on the day but having lost about 0.6% this month and over 2% since the war began, largely due to Japan's heavy reliance on energy imports. Governor Kazuo Ueda confirmed the bank's readiness to raise rates to prevent energy price shocks from spilling into general inflation, provided the economic slowdown from the Middle East crisis remains limited.

Christopher Wong, a strategist at OCBC, commented: "There is a hawkish tone; the bank might have raised rates already if not for the war, but any future increases will likely be gradual." He added that the yen faces a floor near levels that might trigger official intervention, making a strong rally difficult to foresee currently.

Weekly data shows that investors are holding their largest short positions on the yen since late July 2024—shortly after the last government intervention when the exchange rate crossed 161 yen per dollar. Traders remain on high alert for potential support from Japanese authorities, with 160 yen per dollar viewed as a critical threshold.

Elsewhere, the Australian dollar fell 0.26% to 0.7164 dollars following local inflation data that showed persistent price pressures, even though the core trimmed-mean inflation index came in slightly lower than expected.

Gold prices continued their decline in the European market on Wednesday, marking the third consecutive day of losses and approaching a four-week low. The precious metal remains under pressure from a strengthening U.S. dollar against a basket of global currencies.

The continued demand for the American currency as a preferred alternative investment comes as optimism fades regarding the success of peace talks between the United States and Iran. Markets are also focusing on the Federal Reserve’s decisions later today—the final meeting under Jerome Powell’s leadership—where interest rates are expected to remain unchanged while providing critical clues on the future path of U.S. monetary policy.

Price Overview

* Gold Prices Today: Gold fell by 0.85% to ($4,557.39), from an opening level of ($4,596.76), after recording a session high of ($4,610.48).

* At Tuesday's close, gold prices lost 1.8%, marking a second consecutive daily loss and hitting a four-week low of 4,554.97 dollars per ounce due to the rising dollar.

The U.S. Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a second session. This climb reflects investors' focus on the dollar as a safe haven amid fears of a deadlock in U.S.-Iran peace talks and the potential for renewed military confrontations in the Middle East.

Efforts to end the war have reached an impasse, with Donald Trump expressing dissatisfaction with Tehran's latest proposal. The U.S. President insists on including the nuclear file as a core component of any peace agreement. Meanwhile, oil prices continue to rise, with Brent crude remaining above 110 dollars per barrel amid reports that the U.S. will extend its blockade of Iranian ports.

The Federal Reserve

The Federal Reserve concludes its third policy meeting of 2026 later today. The central bank is widely expected to maintain interest rates at the 3.75% range for the third consecutive meeting. 

The interest rate decision and policy statement are scheduled for release at 18:00 GMT, followed by a press conference with Fed Chair Jerome Powell at 18:30 GMT. His comments are expected to provide decisive evidence regarding the future trajectory of rates, particularly in light of economic developments linked to the Iranian war.

Jerome Powell

* Today’s meeting is the last for Jerome Powell as Chair of the U.S. central bank.

* Powell's official term ends on May 15, 2026.

* President Donald Trump has nominated Kevin Warsh to succeed Powell. The Senate is expected to vote on his confirmation soon so he can assume duties next month.

U.S. Interest Rates

* Kevin Warsh stated last week that he has not made any promises to Trump regarding interest rate cuts.

* According to the CME FedWatch Tool: The probability of keeping rates unchanged this week stands at 99%, with a 1% probability of a 25-basis-point hike.

Gold Performance Expectations

Market strategist Ilya Spivak noted that gold has stabilized as markets await the FOMC meeting. He explained that much of the market's resilience since the tariff-induced panic in April stems from the assumption that the Fed is ready to intervene if conditions deteriorate. If the Fed signals difficulty in taking such action, gold prices could fall. Standard Chartered Bank noted in a memo that while gold performance may be volatile in the near term, structural drivers—such as geopolitical tensions and trade uncertainty—should push prices to retest record highs in the coming months.

SPDR Fund

Gold holdings at the SPDR Gold Trust decreased by 3.43 metric tons on Tuesday, marking the fifth consecutive daily decline. Total holdings fell to 1,040.91 metric tons, the lowest level since November 24, 2025.

The Euro fell in the European market on Wednesday against a basket of global currencies, continuing its losses for the second consecutive day against the U.S. dollar. This decline is driven by risk aversion as investors focus on purchasing the American currency as the preferred alternative investment, following media reports that the United States will extend its blockade of Iranian ports.

The European Central Bank (ECB) begins its monetary policy meeting later today, with decisions due on Thursday. Markets widely expect interest rates to remain unchanged, while looking for further clues regarding the path of European monetary policy for the remainder of the year.

Price Overview

* Euro Exchange Rate Today: The Euro fell against the dollar by approximately 0.1% to ($1.1705), from today’s opening price of ($1.1712), after reaching a high of ($1.1621).

* The Euro ended Tuesday's trading down by less than 0.1% against the dollar, marking its first loss in three days amid concerns that peace talks between the U.S. and Iran have stalled.

The U.S. Dollar

The dollar index rose by 0.1% on Wednesday, continuing its gains for the second consecutive session. This reflects the ongoing ascent of the American currency against a basket of major and minor rivals.

This rise comes as investors prioritize the U.S. dollar as a safe haven amid fears that current diplomatic efforts may falter, increasing the likelihood of renewed military confrontations in the Middle East. Efforts to end the war with Iran have reached an impasse, with Donald Trump expressing dissatisfaction with Tehran's latest proposal, as the U.S. President insists on addressing the nuclear file as a fundamental part of any peace agreement.

Meanwhile, Brent crude remained above 110 dollars per barrel amid reports that the U.S. will extend its blockade of Iranian ports. The results of the Federal Reserve meeting, scheduled for release later today, dominate the scene. The central bank is widely expected to hold rates steady, with focus shifting to its assessment of the war's impact on the economy and the future of Jerome Powell.

European Central Bank

The ECB convenes later today for its third monetary policy meeting of 2026, with decisions to be announced on Thursday. The central bank is expected to keep interest rates on hold for the seventh consecutive meeting.

The policy statement and Christine Lagarde’s press conference are expected to provide stronger evidence regarding the trajectory of European interest rates this year, especially amid speculation that inflation may accelerate again due to rising global energy prices. Sources told Reuters that the ECB is likely to begin discussing potential rate hikes during this week's meeting.

European Interest Rates

* Money market pricing for a 25-basis-point interest rate hike by the ECB this week remains stable at less than 20%.

* ECB President Christine Lagarde stated that the bank is prepared to raise interest rates even if the anticipated rise in inflation is expected to be short-term.

The Australian dollar fell in the Asian market on Wednesday against a basket of global currencies, moving in negative territory for the second consecutive day against its U.S. counterpart. This follows the release of Australian inflation data that came in below market expectations.

The data led to a decrease in the probability of the Reserve Bank of Australia (RBA) raising interest rates at its upcoming May meeting, despite warnings from the Treasurer that the oil shock could impact a broader range of prices across the country.

Price Overview

* **Australian Dollar Exchange Rate Today:** The Australian dollar fell 0.25% against the U.S. dollar to (0.7160), from an opening price of (0.7179), after recording a high of (0.7190).

* The Australian dollar ended Tuesday's trading down approximately 0.1% against the U.S. dollar, marking its first loss in three days amid a decline in U.S. stocks on Wall Street.

Inflation in Australia

Data released Wednesday by the Australian Bureau of Statistics showed that the headline Consumer Price Index (CPI) rose 4.6% annually in March, lower than market expectations of 4.8%. The index had recorded a 3.7% increase in February.

While automotive fuel prices jumped by nearly 33% in March compared to February, the government's measure to halve the fuel tax starting in April is expected to ease some pressures.

Treasurer Jim Chalmers stated in a press conference: "What we are seeing here is essentially a reflection of international pressures on oil prices. However, in the coming months, we expect the impact of this oil shock to extend across a wider range of prices, affecting trimmed mean averages as well."

Australian Interest Rates

* Following the aforementioned data, the market pricing for a 25-basis-point interest rate hike by the RBA in May fell from 85% to 75%.

* To refine these probabilities, investors are awaiting further data on unemployment and wage levels in Australia.

* The RBA has raised interest rates twice this year to 4.1%, resulting from the impact of the U.S.-Israeli war on Iran on global oil trade and rising fuel prices nationwide.

Opinions and Analysis

Stephen Smith, partner at Deloitte Access Economics, said: "Today's CPI data, the first to partially reflect the closure of the Strait of Hormuz, points to the possibility of the RBA raising interest rates next week." Smith added: "This hike is not certain, but Australia's inflation level prior to this crisis leaves the central bank with few options."

Tony Sycamore, an analyst at IG, noted that there is a counter-argument for the RBA to keep interest rates steady in May to gather more information, especially as gasoline prices have begun to decline in recent weeks.