U.S. Dollar Declines Ahead of Fed’s Rate Policy Decision

The U.S. dollar weakened at the start of Wall Street trading, influenced by expectations that the Federal Reserve will maintain steady interest rates, coupled with an improved risk appetite in financial markets on Wednesday. This shift was driven by economic data and statements from U.S. President Donald Trump regarding the Middle East conflict between Iran and Israel.

It is widely anticipated that the Federal Reserve will keep interest rates unchanged at its June 2025 meeting. The central bank’s decision is likely based on inflation trending steadily downward toward its official target. Additionally, the strength of the U.S. labor market provides the Fed with room to maintain current rates without immediate adjustments.

Most forecasts suggest the Fed will hold interest rates within the current 4.25%-4.50% range. The dollar was further pressured by positive U.S. economic data, with weekly unemployment claims meeting expectations.

The New York Stock Exchange also received support from a decline in U.S. Treasury yields, driven by weaker housing data, including new home construction and building permits for May. Yields on 10-year U.S. Treasuries fell by approximately two basis points to 4.36%.