By Van Ha Trinh, Financial Markets Strategist at Exness
The US dollar held steady on Monday, hovering near a multi-week low as investors looked ahead to the Federal Reserve’s policy decision this week. Market pricing shows about a 95% chance of a quarter-point rate cut on Wednesday, while only a small probability is expected for a larger half-point move. Markets are also pricing in three rate cuts by year-end.
Attention will also be on the Fed’s updated “dot plot” and Chair Jerome Powell’s press conference, which will be critical in shaping expectations for the easing path. If Powell’s message and the projections lean more dovish than markets anticipate, both the dollar and Treasury yields could come under renewed pressure. Conversely, if the Fed signals a more cautious approach, the downside could be contained.
Treasury yields were steady, with the 10-year holding above 4.0%. Investors are waiting to see if inflation dynamics and Fed guidance shift expectations further, as yields could react sharply to any surprise in either the pace or scale of policy easing.