Dollar holds at multi-month lows as Fed decision looms

The US dollar remained pinned near multi-month lows on Wednesday. Traders could remain cautious ahead of the Federal Reserve’s policy decision later today.

Markets are already pricing a quarter-point rate cut as a near certainty, with the focus firmly on the Fed’s updated projections and Chair Jerome Powell’s tone regarding the path of easing into year-end.

Tuesday’s data releases did little to alter the outlook. Retail sales rose 0.6% in August, beating expectations. Industrial production also surprised to the upside, ticking up 0.1% after July’s -0.4% decline.

While these results suggest some resilience in consumer spending and factory activity, they were not strong enough to shift sentiment, given the broader signs of a cooling labour market that have dominated recent weeks.

Treasury yields were stable across the curve, with the 10-year holding firmly near 4.0%. Bond investors remain cautious, expecting yields to react after the Fed’s announcement. Any dovish revisions in the economic projections or Powell’s guidance could reinforce downside pressure on both the dollar and yields, while a more cautious signal might offer temporary relief.