The USD Index dips toward 101.40 ahead of the Fed’s policy decision, with risk sentiment improving on reduced geopolitical risks.
The US Dollar softened slightly on Monday as a temporary pause in US-Iran hostilities reduced demand for safe-haven assets. The US Dollar Index (DXY) fell toward 101.40, paring earlier losses as investors positioned for the Federal Reserve’s two-day meeting starting Tuesday.
Markets expect the Fed to hold its target rate at 3.50%–3.75%, though persistent inflation keeps the possibility of a hike in focus. Oil prices declined sharply on eased Middle East tensions, alleviating energy-driven inflation concerns and supporting risk-sensitive currencies.
EUR/USD traded near 1.1370, while GBP/USD slipped toward 1.3300 ahead of key data releases, including Germany’s Q2 GDP and July inflation report. The Bank of England’s policy decision later this week is also in focus, with rates expected to remain unchanged.