The U.S. dollar is extending its rally, with the Dollar Index moving above 100 to its highest level in more than a month following the Federal Reserve’s latest interest rate decision. Markets are interpreting the Fed’s move as hawkish, with investors closely watching the central bank’s updated dot plot and expectations for further rate increases.
The currency reaction is also playing out across global markets. The British pound is paring losses after the Bank of England held interest rates steady, while warning that further tightening could be necessary if the Middle East conflict remains unresolved. Meanwhile, the Bank of Japan is expected to deliver its own rate decision following its two day policy meeting.
With major central banks taking different approaches to inflation and interest rates, currency markets remain unsettled. Despite relatively subdued headline volatility, traders are closely watching the dollar, sterling and yen for signs of the next major move in global foreign exchange markets.