US Session – Market Drivers: Dollar Positively Reacts to FOMC Signals

Dollar Gains Strength as Fed Signals More Rate Cuts: As the year winds down, forex markets are digesting the latest insights from the Federal Open Market Committee (FOMC) December meeting. The released minutes revealed that many Fed officials are open to additional rate cuts if inflation continues to ease, while projecting modestly faster economic growth compared to earlier forecasts.

USD Holds Firm Across Majors

The US Dollar Index (DXY) traded around 98.20 on Tuesday, gaining 0.2% amid the market’s reaction to the FOMC minutes. The greenback showed its strongest performance against the British Pound, while holding steady against other major currencies.

• EUR/USD hovered near 1.1750, showing calm as year-end trading thins. Analysts anticipate the Fed could reduce rates between one and three times next year, supporting the dollar’s resilience.
• GBP/USD consolidated around 1.3470 after a recent rally to a three-month high near 1.3530.
• USD/JPY recovered slightly to trade near 156.40.
• AUD/USD and USD/CAD ended the day largely unchanged.

Gold Finds Support Above $4,350
Gold rebounded slightly to $4,360 per troy ounce on Tuesday after hitting an intraday low of $4,300 on Monday. The precious metal trimmed part of its recent weekly losses following profit-taking, remaining a safe-haven favorite ahead of New Year festivities.

Market Outlook

Most markets are expected to remain closed on Wednesday for New Year celebrations. Investors are keeping a close eye on central bank policies, with the Fed’s willingness to cut rates continuing to shape currency and precious metal trends.

Why Investors Favor Gold

Historically, gold has served as both a store of value and a hedge against inflation. Its appeal endures in times of market turbulence, providing a safe investment alternative independent of any government or central bank.