Dollar Trades Sideways as Market Focus Shifts to Upcoming Fed Decision

Key Moments

Quiet FX Trade Ahead of FOMC

The US Dollar (USD) shows modest and mixed intraday moves. Trading remains subdued as investors position ahead of Wednesday’s Federal Open Market Committee (FOMC) announcement. According to Scotiabank Chief FX Strategists Shaun Osborne and Eric Theoret, this caution is keeping volatility low.

Global Bond Markets React to Policy Rhetoric

“Stocks are churning in tight ranges, while global bonds are softer as investors consider fading rate-cut prospects outside the US. European bond yields are up 4–5 bps after hawkish comments from ECB Governor Schnabel. Additionally, Friday’s jump in Canadian bond yields is adding momentum to the move.”

Fed Rate Cut Expectations and Policy Outlook

“The Fed is widely expected to cut rates this week. The decision should also give markets more insight into how a deeply divided policy-making body expects rate changes to unfold in the year ahead. This will come through updated dots and economic forecasts. However, markets still need to balance expectations between sticky US inflation and the expected dovish shift in Fed leadership next year. More rate cuts are expected in 2026, yet uncertainty remains.”

USD Tone and DXY Technical Picture

“The USD retains a sluggish undertone. It may need clear hawkish signals in the Fed’s communications this week to avoid further weakness. This risk is elevated because the current period is seasonally weak for the USD overall. Meanwhile, the DXY continues to consolidate on the charts. A tight trading range is forming between 98.8 (bear trigger) and 99.2 (short-term resistance). As a result, a potential bear-flag pattern is developing.”

DXY Trading Range Snapshot