The US Dollar Index (DXY) traded marginally lower near 101.30 in European hours on Wednesday as markets awaited the Federal Reserve’s policy decision due at 18:00 GMT. Traders priced a roughly 60–70% chance the Fed would keep rates unchanged at 3.50%–3.75% for a fifth consecutive meeting. Fresh US-Saudi strikes on Iran-aligned targets in Iraq lifted oil prices and added a geopolitical overlay to the dollar’s cautious tone.
DXY Near 101.30 as FedWatch Shows 60–70% Odds of Rate Hold; Warsh Press Conference Ahead
DXY hovered near 101.30 after opening around 101.43, according to market data. The CME FedWatch tool showed elevated odds of no change in the federal funds rate at the July 28–29 meeting. Fed Chair Kevin Warsh is scheduled to hold a press conference after the statement. Warsh has previously indicated limited appetite for detailed forward guidance, telling markets in June that such guidance is “not well-suited in the current policy juncture.”
Separately, the joint US-Saudi operation against Iran-aligned sites in eastern Iraq, confirmed by CENTCOM, pushed crude higher and injected safe-haven and inflation-risk considerations into currency trading.
Oil Spike Adds Inflation Risk as Traders Hold Back Ahead of Fed Decision
Dollar softness reflected classic pre-Fed caution: investors preferred to wait for the policy statement and Warsh’s remarks rather than position aggressively. Higher oil prices from the Middle East escalation raised the possibility of renewed inflation pressure, which can support the dollar over time but created short-term uncertainty. Risk-off flows from the geopolitical news competed with rate-expectation dynamics, keeping moves contained.
Fed Holds 3.50%–3.75% for Fifth Meeting as Oil Volatility Shapes 2026 Rate Bets
This is the second FOMC meeting under Chair Kevin Warsh. The Fed has held the policy rate in the 3.50%–3.75% range throughout recent meetings. Market pricing for a possible hike later in 2026 has fluctuated with oil-driven inflation concerns and mixed economic data. The Strait of Hormuz tensions and related proxy activity have kept energy markets volatile, influencing broader inflation and rate expectations.
Fed Statement at 18:00 GMT in Focus as Hold Odds Stay Elevated
Focus turns to the 18:00 GMT policy statement and Warsh’s press conference. A hold is widely expected, so the tone on inflation, energy prices, and the economic outlook will matter most. Any signal that the Fed remains open to future tightening could lift the dollar; a more neutral stance may keep it range-bound. Oil price reaction to further Middle East developments will also feed into the next leg for USD pairs.