Investing.com - The dollar was slightly higher against most of its peers in early trading in Europe Wednesday, supported overnight by fresh reports suggesting a lack of progress in trade talks with China.
However, it has settled firmly into a narrow range as the market waits for the end of the Federal Reserve’s two-day policy meeting.
The dollar index, which measures the greenback against a basket of six major currencies, was at 95.928, up 0.1% from late Tuesday.
The Fed is due to release its policy statement at 2:00 PM ET (1800 GMT), and markets already appear to have priced in some softening of its stance, although it’s far from certain what shape that might take.
Of most interest is the so-called ‘dot-plot’ which maps FOMC members’ expectations of where rates will be over a two-year horizon, and many expect this to show that expectations of further interest rate hikes have fallen since the Fed’s last meeting. There are also some hopes for a clearer statement on when – and at what level – the Fed will stop shrinking its balance sheet.
Marc Chandler, managing partner at Bannockburn Global Forex, warned that the market may now be expecting too much from the Fed, saying that a large majority of Fed officials had foreseen the need for two or more rate increases at the last meeting.
“It seems unreasonable to expect them all to completely reverse themselves. The median forecast will still likely anticipate a hike,” Chandler wrote in a preview of the meeting. Financial conditions, such as bond yields, have eased just as quickly this year as they tightened at the end of 2018, he noted.
At 04:00 AM ET (0800 GMT), the euro was a touch lower against the dollar at $1.1351, while the British pound was also down 0.2% at $1.3239.
The pound has retreated a little after reports suggesting the EU will take a hard line with any request from Prime Minister Theresa May to push back the March 29 deadline for Brexit. EU leaders are due to start a summit in Brussels later today, and May is expected to present her request on Thursday morning.