The U.S. dollar rose slightly on Wednesday, trading within narrow ranges as markets waited for the conclusion of the Federal Reserve’s latest meeting and anticipated trade talks between the U.S. and China.
At 04:45 ET (08:45 GMT), the Dollar Index, which tracks the greenback against six major currencies, increased by 0.2% to 99.225, recovering from recent losses.
Dollar Boosted by Trade Talks
The dollar saw some support on Wednesday following news that Treasury Secretary Scott Bessent and trade negotiator Jamieson Greer will meet with China’s top economic official in Switzerland on Saturday. This announcement helped lift the dollar, which had faced significant losses in April after President Donald Trump imposed “reciprocal” tariffs on major trading partners, especially China.
Although a trade deal may take time to finalize, the willingness of both sides to engage in talks provided some relief for the struggling dollar.
Analysts at ING noted that in April, the yen and Swiss franc had benefitted from the tariff measures and the broad sell-off in U.S. assets. However, they expect that a de-escalation of tensions could lead to a recovery in USD/JPY and USD/CHF.
That said, the dollar’s gains were limited as investors awaited the conclusion of the Federal Reserve’s meeting later in the day.
Fed Meeting in Focus
The U.S. central bank is widely expected to keep interest rates steady, with attention turning to comments from Fed Chair Jerome Powell. Analysts will look for any hints on how the Fed views the potential impact of President Trump’s trade policies and the future direction of interest rates.
ING analysts suggested that while Powell’s comments may provide some direction, the market is likely focused on a rate cut expected in July, with investors waiting for further economic data.
Euro and Other Currencies
In Europe, EUR/USD remained mostly unchanged at 1.1367, following a 3.6% rise in German industrial orders in March, which exceeded expectations.
The euro had previously dipped after Friedrich Merz was elected Germany’s chancellor, following a surprising setback in an earlier parliamentary vote. However, the euro showed resilience, despite briefly falling to 1.1310.
GBP/USD fell by 0.2% to 1.3352 ahead of the Bank of England’s policy meeting, where a 25 basis point rate cut is expected.
Yuan Slips Amid PBOC Rate Cut
Elsewhere, USD/JPY rose by 0.6% to 143.33, as the yen weakened following the announcement of U.S.-China trade talks. Meanwhile, USD/CNY increased by 0.1% to 7.2257 after the People’s Bank of China cut its benchmark repurchase rate by 10 basis points to 1.40% and reduced its reserve requirement ratio by 50 basis points to 6.2%. These measures are aimed at providing further monetary support to the Chinese economy amid ongoing trade tensions with the U.S.
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