 Dollar is recovering across the board as markets enter the US session, though the move appears to be more caution-driven than a shift in sentiment. With FOMC rate decision looming, traders are taking a more neutral stance rather than doubling down on Dollar’s recent weakness. Fed is widely expected to keep rates steady at 4.25-4.50%, so the real focus will be on the updated economic projections. Given the uncertainty surrounding US trade policy, these forecasts could offer the first glimpse of how policymakers are factoring in US President Donald Trump’s tariffs into their outlook. Since the last FOMC meeting in December, the U.S. has implemented its first set of tariffs under the Trump administration. Now, the markets are preparing for the ambitious reciprocal tariffs set to take effect in early April. While tariff impacts may not be fully reflected in Fed’s projections yet, traders will be looking for any revisions to growth and inflation forecasts that could indicate whether policymakers are growing more concerned about trade war risks. If the Fed acknowledges increased downside risks to growth or upward pressures on inflation, markets could adjust their rate cut expectations accordingly. Meanwhile, Euro is on the weaker side as Eurozone CPI for February was finalized slightly lower than initial estimates. Comments from ECB officials today are typically cautious. French ECB Governing Council member François Villeroy de Galhau reiterated that the timing and size of rate cuts will depend on data. Meanwhile, ECB Vice President Luis de Guindos emphasized that defense spending remains Europe’s top priority, but warned that budget stability must be maintained within the bloc’s fiscal rules.... |
