The DXY falls nearly 1.5% in three days after the Fed’s ambiguous stance raises doubts over inflation-fighting resolve.
The US Dollar Index (DXY) struggles to hold above 100.00 after a 1.5% decline over the past three sessions, driven by the Federal Reserve’s lack of clear forward guidance at its latest meeting. Markets interpreted the ambiguity as a sign the Fed may not follow through on aggressive tightening to combat inflation, triggering a selloff in USD positions.
Prior to the FOMC meeting, the dollar’s summer rally was fueled by expectations of sustained rate hikes. Analysts now warn that the Fed’s reluctance to commit to further tightening could lead to a prolonged unwinding of long USD positions, particularly if upcoming economic data disappoints or oil prices weaken.
Experts suggest Fedspeak in the coming weeks will be critical in determining the dollar’s next move, with some banks cautioning that a dovish pivot could extend the selloff. Commerzbank analysts even flag potential rate cuts in 2027 as a longer-term risk for the currency.