NEWS

The US Dollar edged higher on Wednesday, recovering from its lowest level in nearly a week, after the Federal Reserve adopted a cautious tone regarding further monetary easing. While markets still price in two potential interest rate cuts this year, the Fed’s balanced stance prompted traders to reassess expectations.

The Euro held broadly steady despite a surprise drop in German business sentiment, as the Ifo Business Climate Index fell to 87.7 in September from 88.9 in August, reflecting weak economic outlooks. The Euro slipped 0.4% to $1.177, while the British Pound declined 0.3% to $1.3482, as investors shifted toward the dollar as a relative safe haven.

Interest Rate Cuts Under the Spotlight

Markets remain focused on the Fed’s two remaining meetings this year, with expectations of quarter-point cuts, along with another reduction in early 2026. Attention now turns to Friday’s release of the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, which will play a key role in shaping monetary policy direction.

US Dollar Index Performance

The US Dollar Index, which tracks the greenback against six major currencies, rose 0.35% to 97.575 after touching a low of 97.198 overnight. This rebound follows two straight sessions of losses, signaling a modest recovery in dollar demand.

Against the Japanese Yen, the dollar gained 0.29% to 148.065, as markets closely watch the Bank of Japan’s policy stance amid warnings that higher rates could weigh on mortgages and corporate investments.

Asian Markets

In the Asia-Pacific region, the Australian Dollar rose 0.23% to $0.6614 after the Consumer Price Index (CPI) climbed to 3% in August, exceeding forecasts of 2.9%. However, a decline in core inflation to 2.6% limited expectations for near-term rate cuts by the Reserve Bank of Australia.

Meanwhile, the New Zealand Dollar steadied at $0.5851 following the announcement of a new central bank governor, signaling a potential shift in the country’s future monetary policy direction.

Conclusion

Global forex markets remain sensitive to Fed policy signals and inflation data, with traders adopting a cautious stance amid ongoing uncertainty. According to Point Trader Group, continued volatility underscores the critical role of central banks in guiding currency trends and shaping investor sentiment.