US Dollar Index steadies near 98.50, all eyes on Fed rate decision

• US Dollar Index flat lines around 98.65 in Wednesday’s early Asian session. 
• The Fed is widely expected to hold interest rates steady at 3.50%–3.75% at the April meeting on Wednesday.
• The attention will shift to the US Q1 GDP and PCE Price Index inflation reports, which are due on Thursday. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 98.65 during the Asian trading hours on Wednesday. The DXY holds steady as traders await a closely watched US Federal Reserve (Fed) interest rate decision later on Wednesday. 

The Fed is expected to hold the federal funds rate steady between 3.50% and 3.75%, where it has sat since January. This policy meeting is likely Chair Jerome Powell’s final session before a Fed Chair transition to nominee Kevin Warsh.

Traders will closely monitor Jerome Powell’s press conference after the rate decision for hints on how the Fed may react to the risks ahead. If the US central bank maintains a hawkish tone regarding persistent inflation, this could boost the US Dollar against its rivals in the near term. 

“The question is what Powell is going to do, because he still holds the governor seat until 2028, so whether he chooses to resign after the expiry of the Chair term or if he stays on as a governor and as sort of a shadow Chair,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

On Thursday, the preliminary reading of the US Gross Domestic Product (GDP) for the first quarter (Q1) and Personal Consumption Expenditures (PCE) Price Index inflation report will take center stage. If the reports show worse-than-expected outcomes, this could drag the DXY lower.