The dollar has slipped slightly after weak U.S. business activity data released Monday played into the theory that the Federal Reserve will have limited headroom to raise interest rates any further after Wednesday’s widely expected hike.
A majority of economists polled by Reuters now expect Wednesday’s increase to mark the last increase of the central bank‘s current tightening cycle.
That said, the dollar’s losses are minimal with traders wary of taking too strong positions given inflation remains above the Fed’s medium-term target.
“The reason why we warn against pursuing a full ‘risk-on’ rally in Rest of World (RoW) currencies is that the European economy looks weak and tomorrow’s FOMC meeting will probably see the Fed’s foot remaining firmly on the monetary brakes,” said analysts at ING, in a note.
