The dollar remained stable at its highest level in nearly two months on Monday, with the United States expected to cut interest rates for the first time in 10 years, while the risk of Britain leaving Europe without an agreement rose, pushing Sterling down to a 28-month low against the dollar.
The Federal Reserve is expected to cut interest rates by 25 basis points on Wednesday. Unlike interest rate cuts in countries facing imminent risks, this so-called defensive rate cut aims to protect the U.S. economy from global uncertainty and trade pressures.
In afternoon trading, the dollar index rose 0.02% to 98.027. The better-than-expected U.S. gross domestic product data released on Friday boosted the dollar index; on Monday, the dollar continued to rise, hitting a two-month high. But as traders avoided making big bets before the Fed made its decision, the rally fell.
"The market is quiet, waiting for news from the Federal Reserve. The dollar is generally well supported. The market seems to expect that the Fed will not be able to reach the very moderate level expected by investors, "said Daniel Katzive, head of North American foreign exchange strategy at BNP Paribas.
Despite the strong economic growth data released last Friday, "the market is still digesting very mild guidance and is expected to cut interest rates by about 75 basis points this year. So if the Fed fails to fully meet expectations, people may be very disappointed, "Action Economics analysts wrote.
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