The Fed's decision stimulates the dollar's strength
The dollar rose to its highest level in a week after the Federal Reserve maintained a cautious stance on interest rate cuts on Wednesday, and against the backdrop of rising oil prices and safe haven assets as a result of the Iran-Israel conflict.
As the Federal Reserve kept interest rates unchanged at 4.50%, as widely expected, adhering to a wait-and-see policy, as investors evaluated the cautionary tone of Fed Chairman Jerome Powell on inflation, Fed Chairman Jerome Powell pointed to the possibility of higher inflation in the coming months, pointing to the impact of tariffs imposed by President Donald Trump.
(We know this because this is what companies say, this is what previous data indicates), he said.
The central bank also lowered growth forecasts, maintaining its forecast for two interest rate cuts by 25 basis points in 2025, which surprised markets that had only calculated one cut.
Moreover, the dollar found support from safe-haven flows amid rising geopolitical tensions. Especially after the possible involvement of the United States in the Israeli-Iranian conflict, with reports indicating that Washington is preparing for a possible strike on Iran.
Meanwhile, Iranian Supreme Leader Ayatollah Ali Khamenei warned of irreparable harm to the United States if it intervenes militarily.
Currency movements after the decision:
Dollar index
The US Dollar Index (DXY), which measures the value of the US currency against six other major currencies, rose by 0.11% to reach levels of 99 points now, its strongest weekly performance since late January.
EUR/USD
The euro hit its lowest level in a week, falling by 0.25% to 1.1455 dollars, heading for a decline of 0.8% for the week, its biggest weekly decline since February.
GBP/USD
The British pound fell by 0.16% to 1.3390 US dollars ahead of the monetary policy decision from the Bank of England today, as the central bank is expected to keep its policy unchanged and hold the interest rate steady at 4.25%.
USD/CHF
The dollar/franc pair rose today, nearing 0.8200, with the Swiss franc cutting interest rates by 25 basis points today, to 0.00%. This could lead to a return to negative interest rates by the end of the year or early 2026.
