Dollar parks at two-week highs ahead of Fed decisions

The dollar rose in European trade on Wednesday against a basket of major rivals, extending gains for the second day and scaling a two-week high, as US 10-year treasury yields advanced, in turn boosting the greenback.

Investors await a batch of crucial US data later today, which will set up fresh pricing for US interest rate cuts this year. 

The Federal Reserve is announcing the results of the periodic policy meeting later today, expected to maintain interest rates unchanged for the sixth straight meeting.

The Index

The dollar index rose 0.2% today to 106.49, with a session-low at 106.31.

The index closed up 0.65% on Tuesday, the largest profit since April 12 following strong US data. 

Recent US data showed employment costs rose past estimates in the first quarter, while US housing sales rallied in February.

The index rose 1.75% in April, the fourth monthly profit in a row, as the prospects of US interest rate cuts in the summer recede. 

US Yields 

US 10-year treasury yields rose 0.25% on Wednesday, maintaining gains for the second session and almost hitting five-month highs, boosting demand on the dollar. 

The development comes after strong US data bolstered the case for the Fed maintaining interest rates unchanged for an extended duration.

US Rates

According to the Fedwatch tool, the odds of a Fed interest rate cut in June stood at just 7%, while the odds for such a cut in July stood at just 22%. 

Investors now barely expect a single interest rate cut in the US this year, down from three in previous forecasts. 

Important Data

Now investors await a batch of important US data, including private sector employment data, and manufacturing and job opportunities data. 

The ADP index for private sector employment is expected to show the addition of 179 thousand news jobs last month.

The ISM combined index is expected at 50.00 in April. 

The Fed 

The Federal Reserve is expected to maintain interest rates unchanged today at 5.5%, already the highest since 2001. 

However, it’ll likely provide important clues on the future of US interest rates this year.