Fed's Rate Cut Dilemma Amid U.S. Inflation and Geopolitical Tensions

The U.S. dollar held firm on Wednesday as investors awaited key inflation data that could impact the Federal Reserve's future rate decisions. Despite a slowdown in job creation, confidence in equity markets remains high, with stocks hitting record levels. The possibility of a half-point interest rate cut by the Fed next week looms.

Geopolitical tensions add another layer of complexity, with Israel's airstrike in Qatar and Poland's response to drones from a Russian attack in Ukraine heightening investor anxiety. While the euro gained against the Polish zloty, its performance against the dollar and other currencies remained subdued.

As traders fully anticipate a quarter-point cut, they consider the prospect of a larger reduction if inflation data surprises on the downside. Meanwhile, political shifts in France and Japan add to the global uncertainty. The U.S. dollar index experienced stability amid mixed economic signals and ongoing uncertainty over U.S. trade and fiscal policies.

(With inputs from agencies.)