The US dollar could come under pressure during the next couple of weeks after the Federal Reserve decided to keep its interest rates unchanged.
The decision came as anticipated by the market, however, the central bank revised its forecasts, affecting traders’ expectations over the direction of interest rates.
In this regard, the Federal Reserve could seek higher interest rate levels during the remainder of the year which could support the dollar against other currencies over the medium term if new hikes materialise.
Bas Kooijman, CEO and Asset Manager of DHF Capital said, “As a result, traders could monitor upcoming economic data to determine whether the central bank could raise its rates at its next meeting.
“Over the longer term, the US currency could maintain a downtrend in particular as interest rates could be close to their peak.
“While over the short term, the dollar was recording losses against some major currencies like the euro or the pound and could be exposed to more.
“The euro has benefitted from the European Central Bank’s decision to raise its interest rates again. The institution maintained its hawkish rhetoric and could continue to tighten its monetary policy in the future.
“The British pound could also maintain its strength against the dollar in particular as traders expect the Bank of England to raise interest rates next week. The bank continues to face elevated inflation in comparison to its major counterparts.
“The yen however continued to lose ground while the Bank of Japan maintained its dovish policy.”