The dollar was relatively stable on Wednesday, trading in a narrow range as markets turned cautious ahead of the Federal Reserve’s policy announcement later in the day.
The Fed is widely expected to leave interest rates unchanged, though speculation is mounting around a potential rate cut in September.
Market attention is also on the statement’s tone and the possibility of dissent from governors Christopher Waller and Michelle Bowman, who have signalled a preference for a looser monetary policy. Bond markets could also react to any surprise or rapid change in interest rate expectations. In this regard, yields could decline if the Fed softens its tone.
Trade dynamics also add to the market caution. After inconclusive talks in Stockholm, US and Chinese officials agreed to seek an extension of the 90-day tariff truce. Treasury Secretary Bessent described the meetings as “constructive,” but stressed that any deal will require President Trump’s approval. Failure to extend the truce could reignite trade tensions and weigh on the greenback.
Looking ahead, upcoming U.S. data releases, including GDP and non-farm payrolls, could also provide further insight into the economy’s resilience and guide expectations for the Fed’s next move.
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