The US dollar index stabilizes after the Federal Reserve's decision to keep interest rates unchanged: traders prepare for a shock in GDP data and the Personal Consumption Expenditures index

The US dollar index remains near the 104.5 level after the Federal Reserve's decision to keep interest rates steady. Market attention now turns to upcoming US GDP data and the Personal Consumption Expenditures index, which will determine the dollar's future trajectory. Traders are closely monitoring any signs of economic slowdown or persistent inflation.
The US dollar index stabilizes after the Federal Reserve's decision
The Federal Reserve concluded its two-day meeting on Wednesday. As widely expected, the central bank kept the federal funds rate between 5.25% and 5.50%. This marks the third consecutive hold since July 2023. The US dollar index reacted with slight fluctuations, remaining within a narrow range between 104.2 and 104.8.
Federal Reserve Chair Jerome Powell reiterated reliance on data. He emphasized that the committee needs more confidence that inflation is heading sustainably toward 2%. The statement removed any reference to further monetary tightening. This shift suggests the possibility that the rate hike cycle has ended. However, Powell did not rule out raising interest rates again if inflation accelerates.
Market prices reflect dollar stability. According to the CME FedWatch tool, traders assign a 95% probability that interest rates will remain unchanged in January 2025. The first rate cut is not fully priced in until mid-2025. This aligns with the Federal Reserve's dot plot, which anticipates two 25 basis point cuts next year.