The dollar stabilized today, Wednesday, before the Federal Reserve (the US central bank) issued its first monetary policy decision under its new president, Kevin Warsh, with anticipation of potential fluctuations as investors adapt to a new method of decision-making and communication.

The euro stabilized at $1.1605, while the pound sterling fell against the dollar to 1.3420 and fell to 86.5 pence against the euro, after the release of better-than-expected British inflation data, which could give the Bank of England justification to postpone raising interest rates this year.

But the most prominent event today, the US Central Bank meeting, has not yet begun, which contributed to investors’ hesitation in concluding large deals.

The Federal Reserve is widely expected to keep interest rates unchanged at its first meeting in the presence of its new Chairman, Warsh. However, the central bank’s statement, economic forecasts, and press conference will be scrutinized for any signs of a retreat from monetary easing, as officials increasingly move towards monetary tightening to counter inflation risks.

“There have been several central bank meetings this month, but this one casts a shadow over the entire landscape,” said Jane Foley, currency trading expert at Rabobank.

She added: “It is still unclear what Warsh might signal. No one expects a change in interest rates, but will he reduce the importance of the points scheme? Will he try to establish a new framework? Will he try to steer them towards an easing policy?”

US President Donald Trump appointed Warsh and repeatedly criticized his predecessor, Jerome Powell, for his slowness in reducing interest rates.

Financial market forecasts show a probability of approximately 80 percent to raise interest rates during this year.

Before reaching a temporary agreement between the United States and Iran to end the war in the Middle East, economists suggested that the Federal Reserve would indicate a willingness to raise interest rates to limit the impact of rising energy costs on general inflation. However, a decline in oil prices below $80 per barrel may prompt the Council to adopt different signals.

The Bank of England will hold its meeting tomorrow, Thursday, and as is the case with the Federal Reserve, no change is expected in monetary policy, and the focus will be on the statements of decision makers.

Markets currently expect the Bank of England to raise interest rates once before the end of the year.

The yen reached 160.25 against the dollar, recording a slight increase during the day, which kept traders on alert for any possible intervention by the Japanese authorities to support the faltering currency.

Yesterday, Tuesday, the Bank of Japan raised interest rates to the highest level in 31 years in a historic step that came within the framework of its monetary policy returning to normal, indicating its readiness to take further tightening measures in light of its focus on curbing price pressures resulting from the energy shock caused by the Iran war.

However, policymakers have given little indication of when the next interest rate hike will be.

The Swedish krona fell against both the dollar and the euro after the Swedish Central Bank kept the interest rate unchanged. The Riksbank said that the war in the Middle East has increased inflationary pressures, which enhances the possibilities of raising interest, but at the same time it indicated that core inflation remains low and economic activity is weak compared to usual rates.

The euro rose 0.15 percent to 10.88 krona, while the dollar increased 0.19 percent to 9.383 krona. (Reuters)