The dollar index slipped to 101.2 on Wednesday, extending its retreat after briefly touching a 15‑month high of 101.6 in the previous session, following the Federal Reserve’s decision to leave interest rates unchanged. Roughly one-third of market participants had positioned for a rate hike, as rising pro‑inflationary pressures and a robust labor market had strengthened the case for hawks on the FOMC. In line with this, three committee members dissented in favor of an increase.
The dollar’s pullback came despite a renewed surge in oil prices, as strikes between the US and Iran heightened concerns over a prolonged energy supply disruption from the Middle East. The implications of higher energy costs for interest‑rate expectations filtered through to other G10 currencies later in the month, with soaring natural gas prices lending support to both the euro and the yen. In turn, sterling extended its year‑to‑date outperformance ahead of an anticipated Bank of England decision to keep rates on hold.
