Slated for Wednesday, the Fed’s rate decision could knock the dollar’s valuation and traders are already moving with caution.

• The EURUSD pair is wobbling around the $1.05 mark as nervous traders brace for the upcoming volatility with the Federal Reserve’s interest rate decision. The euro shot up as high as $1.0530 on Tuesday before coming down to hug the milestone level after two consecutive days of gains. But that two-day increase is all but a blip in the big picture where the US dollar has demolished the euro’s valuation.
• Another big test looms Wednesday when the Federal Reserve is expected to slash interest rates by 25 basis points. The reduction is part of a sweeping monetary policy loosening that aims to drop borrowing costs and help economic growth while ideally keeping inflation under control. But recent inflation data suggest brewing pressures and that may complicate the otherwise easy decision to trim the benchmark interest rate.
• Since hitting a 2024 high of $1.12 in late September, the euro has washed out more than 6.5% of its valuation against the stronger greenback. Apparently, lower rates aren’t enough to discourage dollar bulls — generally, when borrowing costs go down, the local currency loses appeal as it yields less on deposits. But not this time. There’s another factor that has supported the upside narrative for the dollar and that factor has a name.
• President-elect Donald Trump has vowed to do all he can to support the growth of the US economy and cement the dollar as the undisputed forex king. His pro-growth, dollar-first agenda includes massive deregulation to jumpstart US businesses as well as reducing taxes so these same businesses can expand and scale. Also, higher tariffs on US imports threaten to undermine other economies’ dealings with the US, potentially making the buck more expensive.