Dollar Dips Amid Rate Cut Prospects: Market Braces for Powell's Next Move

The U.S. dollar hovered near four-year lows against the euro and a one-month low against the yen on Wednesday, as market participants anticipated an expected Federal Reserve interest rate cut. Traders have fully priced in a 25 basis point reduction, with attention focused on Federal Reserve Chair Jerome Powell's post-decision remarks to assess the pace of further monetary easing.

Anticipation is high for whether the Fed considered a larger 50 basis point cut, especially in the face of President Donald Trump's economic reforms that challenge the central bank's independence. Currency markets remained calm during Asian trading hours, with the euro slightly easing to $1.1852, paring recent gains.

The British pound held steady at $1.3642, following weak jobs data from the UK, while the dollar index stayed at 96.686, close to a four-month low. Senior macro strategist Laura Cooper warned of potential risks if the Fed delivers fewer cuts than anticipated by markets. The meeting coincides with heightened tensions over the Fed's governance and significant movements in global currency markets.

(With inputs from agencies.)