US Dollar Rallies as Markets Prepare for Fed Hike

The US dollar gained against other most-traded currencies today as market participants were preparing for tomorrow’s policy announcement from the Federal Reserve.

The Fed will conclude its two-day meeting and announce the policy decision at 18:00 GMT tomorrow. It will be followed by a press conference at 18:30 GMT. The gathering will be the first with Jerome Powell as a chairman.

Markets consider an interest rate hike at tomorrow’s meeting almost guaranteed, therefore traders will be more interested in clues to whether the Fed will stick to its plan for three hikes in total this year or consider an additional hike. On one hand, macroeconomic data was rather positive recently, encouraging more aggressive tightening. On the other, inflation remains persistently low, making it less likely for the Fed to become more aggressive.

Outside of the Fed meeting, the theme of trade wars continued to dominate markets, posing danger for the dollar regardless of the central bank’s decision.

EUR/USD dropped from 1.2334 to 1.2262 as of 18:06 GMT today. GBP/USD slipped from 1.4025 to 1.4010. USD/JPY rallied from 106.03 to 106.41.

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