Dollar rose in European trade on Wednesday against a basket of major rivals, holding above three-week lows and on track for the first profit in six sessions.
The gains come ahead of the Federal Reserve’s meeting minutes, expected to offer more clues on the future of US interest rates this year.
The Index
The dollar index rose 0.2% to 104.21, with a session-low at 103.95, after closing down 0.2% on Tuesday, the fifth loss in a row, plumbing a three-month trough at 103.8 after China cut mortgage interest rates in an attempt to boost the struggling real estate market.
US Rates
Currently, markets are putting a 6.5% chance of a 0.25% interest rate cut by the Federal Reserve in March, and a 36% chance for a cut in May, and a 78% chance for a cut in June.
Traders expect a total of 75 basis points of rate cuts by the Fed this year, down from 150 basis points in previous forecasts.
Fed’s Minutes
Global markets now await the Federal Reserve’s minutes for its latest policy meeting to get a clearer picture of the future of US interest rates this year.
The Federal Reserve maintained interest rates unchanged at 5.5% at the latest policy meeting in January.
Back then it said the US economy is performing better than expected, which could nudge the Fed to slow down the pace of policy easing until inflation is reliably closer to 2%.
The Fed believes the US economic outlook remains uncertain, with the FOMC paying close attention to inflation risks this year.
Fed Chair Jerome Powell said that strength of the US economy surprised analysts more than once due to strong demand by consumers, with labor conditions continuing to tighten.
He said the Fed requires “total confidence” that inflation is heading sustainably towards 2% before cutting rates, dismissing the chances of a March rate cut.
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