USD slips ahead of Fed interest rate decision

Daily Currency Update

The US dollar slipped against a basket of currencies on Wednesday as market participants awaited a likely interest rate hike from the US Federal Reserve at 2 p.m. eastern. The central bank is expected to raise interest rates for the first time since 2018 and indicate that we could see a series of rate hikes throughout the rest of the year. Some analysts expect the Fed to raise rates at each of the remaining seven meetings this year to fight inflation that currently sits at 7.9%, a 40-year high.

The prospect of higher rates, as well as the ongoing market risk aversion on the back of the Russia-Ukraine war, means investors could continue to flock to the US dollar. Should the Fed decide that more aggressive action is needed to control price rises and raise rates by 0.5%, there is potential for the dollar to rally. However, investors and analysts will be keenly attuned to any messaging over the impact of the war on future policy moves. The US Dollar Index was down 0.57% at 98.53 at the time of writing.