https://economymiddleeast.com/news/u-s-dollar-edges-higher-ahead-of-feds-first-decision-under-new-chair-warsh/

Vijay Valecha, Wed, June 17, 2026 Middle East Economy

The U.S. dollar index, which tracks the greenback against a basket of major currencies, rose 0.04 percent to 99.58

The U.S. dollar traded higher against most major currencies on Wednesday as markets awaited the Federal Reserve’s first policy announcement under Chair Kevin Warsh, a meeting that could trigger volatility as investors assess his approach to policymaking and communication.

The U.S. dollar index, which tracks the greenback against a basket of major currencies, rose 0.04 percent to 99.58.

Against the U.S. dollar, the euro fell 0.05 percent to $1.1602, while sterling edged 0.12 percent lower to $1.3415. The pound came under pressure after U.K. inflation data came in softer than expected, potentially giving the Bank of England more room to delay interest rate increases this year.

Investors remained cautious ahead of the day’s key event, the Federal Reserve’s policy meeting, avoiding major positions as they awaited further clarity on the central bank’s outlook.

While the Fed is broadly expected to leave interest rates unchanged at Kevin Warsh’s first meeting as chair, markets will closely examine the policy statement, updated economic forecasts and his press conference for signs that policymakers are becoming less inclined toward future rate cuts amid rising concerns over inflation.

“The dollar index has changed little and is currently trading above 99.50. From a fundamental standpoint, the dollar index is only modestly lower despite oil tumbling, but that resilience could crack if today’s Fed meeting delivers a more dovish outlook than anticipated,” said Vijay Valecha, Chief Investment Officer, Century Financial.

“The current consensus points towards a hawkish stance. According to Bloomberg, the index’s implied volatility is pinned, and traders are not paying up for protection. Looking at the SOFR positioning, one of the new standout positions has been a buyer of the SOFR Dec26 96.1875/96.0625 put spreads, targeting one Fed rate hike by the end of the year,” he added.

The Fed’s closely watched dot plot, which outlines policymakers’ expectations for the future path of interest rates, will be a key focus for investors. Market pricing currently suggests roughly an 80 percent probability that the Fed will raise interest rates at least once this year.

Prior to the interim agreement between the United States and Iran aimed at easing tensions in the Middle East, economists had expected the Fed to signal a greater willingness to tighten policy in response to elevated energy prices and their potential impact on broader inflation.

However, with oil prices now back below $80 per barrel, the central bank may strike a different tone in its guidance.

“From a technical standpoint, the U.S. dollar index continues to trade near the triangle’s resistance level. Furthermore, it has support at the 99.30 price mark, reinforcing a bullish stance in the weeks ahead,” added Valecha.

The Japanese yen was slightly firmer against the U.S. dollar, trading at 160.19, though its continued weakness is keeping markets alert to the possibility of intervention by Japanese authorities to support the currency.

The move comes after the Bank of Japan raised interest rates on Tuesday to their highest level in 31 years, marking a significant step in the central bank’s ongoing policy normalization. The decision underscored policymakers’ willingness to tighten monetary policy further as they seek to contain inflationary pressures stemming from the energy shock triggered by the Middle East conflict. However, officials provided little indication of when the next rate increase might occur.

Middle East Economy