US Dollar Index Stays Weak Below 97 Ahead of Fed.

US Dollar Index holds defensive stance below 97.00 ahead of Fed policy announcement.

The US Dollar Index (DXY), which tracks the greenback’s performance against a basket of six major currencies, remains under pressure near 96.70 as investors strengthen their expectations for a Federal Reserve (Fed) rate cut later on Wednesday.

Markets widely anticipate a 25-basis point (bps) cut at the Fed’s September meeting, following signs of cooling in the US labour market. According to the CME Fed Watch Tool, traders are pricing in nearly a 100% probability of a quarter-point cut, while a small minority continues to speculate on the chance of a larger, half-point reduction.

Attention now turns to Fed Chair Jerome Powell’s press conference and the release of the Summary of Economic Projections (SEP), or ‘dot-plot,’ which could provide crucial guidance on the future trajectory of US interest rates. “The dollar is trading with a heavy tone across the board as investors brace for a dovish message in Wednesday’s voting record, dot plot, and press conference,” noted Karl Schamotta, Chief Market Strategist at Corpay.

Meanwhile, geopolitical developments may also influence sentiment. A risk-off environment or shifts in global tensions could bolster safe-haven demand for the greenback. Recently, former US President Donald Trump urged Ukrainian President Volodymyr Zelenskyy to “make a deal” to end the conflict with Russia, while pressing the EU and NATO nations to halt Russian oil imports.