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Dollar steady ahead of start of Fed meeting; traders remain wary By Investing.com

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Investing.com – The U.S. dollar was largely steady on Tuesday, with traders cautious ahead of the Federal Reserve’s latest interest rate-setting meeting.

At 05:10 ET (09:10 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was slightly higher at 104.342, trading within a narrow range.

Dollar Quiet Ahead of Fed Meeting

The U.S. central bank begins its two-day policy meeting later Tuesday and is expected to keep interest rates unchanged when it concludes the following day.

The U.S. central bank is widely expected to leave interest rates unchanged this week, but traders will be looking for any hints from the Fed chairman about how far policymakers are willing to go to cut rates at his press conference.

Weak inflation readings and dovish comments from Fed officials have led markets to ramp up bets that September will be the starting point, with a 25 basis point rate cut.

Powell is also looking to central bankers’ meeting in August, in the absence of a Fed meeting that month, to give further direction to the market, but failure to give a clear signal about a September rate cut this week is likely to boost Treasury yields and the dollar.

Sterling falls on Bank of England uncertainty

In Europe, the pair fell slightly to 1.2857, ahead of Thursday’s meeting.

There is a great deal of uncertainty surrounding this meeting, as key policymakers have not spoken publicly for more than two months due to rules in the run-up to the general election earlier this month.

Policymakers will have to judge between higher-than-expected service price inflation and weak growth, with steady growth marginally preferable as it stands now.

The euro rose 0.1% against the US dollar to 1.0829, after the release of some mixed growth data from the euro zone.

Gross domestic product grew slightly faster than expected in the second quarter, rising 0.3% in the three months to the end of June.

But this relatively good news was overshadowed by an unexpected contraction in the second quarter, with the economy contracting by 0.1% in the second quarter compared to the previous three-month period.

Yen regains some ground

In Asia, the yen rose 0.5% to 154.78, with the yen giving back some of its recent gains ahead of Wednesday’s meeting.

Analysts appear divided on whether the central bank will keep interest rates unchanged or agree to raise them by 10 to 15 basis points.

But aside from interest rates, the Bank of Japan is widely expected to deliver hawkish signals by signaling the end of its quantitative easing policy. The central bank said at its June meeting that it would outline its plans to phase out its asset-buying programs in July.

The pound fell 0.1% to 7.2496, remaining close to an eight-month high amid ongoing concerns about slowing economic growth in the country.

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