Dollar gives up two-week high ahead of Fed's minutes

Dollar fell in European trade on Monday against a basket of major rivals, giving up two-week highs scaled earlier in Asian trade on profit-taking, as investors shun purchase positions ahead of the Federal Reserve’s meeting. 

The Federal Reserve will start its two-day policy meeting tomorrow, expected to maintain interest rates unchanged for the fifth meeting in a row.

However, the Fed and its chair Jerome Powell will likely reveal important clues on the future path of US interest rates.

The Index 

The dollar index fell 0.1% to 103.34, with March 6 highs at 103.51, after closing up 0.1% on Friday, the second profit in a row as US treasury yields advance. 

The index rose 0.7% last week, the first weekly profit in a month on scorching US inflation data, which reduced the likelihood of a June interest rate cut by the Fed.  

US Rates

There’s now a 5% chance of a Fed interest rate cut in May, and a 58% chance of such a cut in June.

Markets are pricing in 75 basis points of total interest rate cuts in 2024. 

The Fed

The Federal Reserve’s policy meeting this week is expected to result in no change in interest rates at 5.5%. 

Investors will closely monitor Fed Chair Jerome Powell’s subsequent press conference to gather clues on the likely path ahead for monetary policies.