The dollar was broadly flat against major currencies on Wednesday ahead of an eagerly-awaited Federal Reserve policy decision that investors hope will signal the end of the U.S. central bank's interest rate hiking cycle.
"Recent progress on inflation has encouraged market participants to expect the Fed to quickly pivot from interest rate hikes to interest rate cuts," said Carol Kong, currency strategist at Commonwealth Bank of Australia.
Investor attention this week will also be on the monetary path taken by European Central Bank and Bank of England, each of which is expected to raise interest rates by 50 bps on Thursday. The Fed raised interest rates by 50 bps in December after four successive 75 bps hikes. It said then that interest rates might need to be higher for longer to tame inflation.
"There is some reason to believe that Powell and team may be aiming to lengthen the hiking cycle in order to buy more time to assess both the incoming data and the impact of their previous aggressive rate hikes."
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