Dollar Holds Firm as Markets Brace for Hawkish Fed Stance
The US dollar held near one-month highs during Wednesday's trading (July 29). The US Dollar Index hovered around 101.30, despite a slight dip of 0.1%.
The dollar's strength was underpinned by expectations that the Federal Reserve might signal a tighter policy stance to combat inflation risks. Investors remained cautious ahead of the Fed's interest rate decision.
The euro edged up to around US$1.139 after previously touching a one-month low. The pound also traded within a narrow range near its lowest level since early July, ahead of the Bank of England's decision.
The Australian dollar weakened by 0.44% after Australian inflation data came in lower than expected. This reduced the likelihood of further interest rate hikes by the Reserve Bank of Australia.
Dollar sentiment was also supported by escalating conflict in the Middle East. US and Saudi strikes against Iran-backed groups in Iraq, along with Iranian missile launches, drove oil prices up by more than 3%.
Markets still price in a roughly 33% chance that the Fed will raise interest rates by 25 basis points. If the Fed signals a hawkish stance, the dollar could strengthen further, while the euro, pound, and risk currencies might face renewed downward pressure.
Source: Newsmaker.id
