FED future guidance seen key

The dollar gained over 1% last week after data showed the U.S. labor market remained tight, creating some uncertainty over the path the Federal Reserve will guide towards on Wednesday.

The Fed is still widely expected to hike rates by 25 basis points, but whether it will signal more rate hikes this year remains to be seen, given that U.S. inflation, while slowing, is still trending above the bank’s annual target range.

“Price action over the past week probably shows that a switch to the disinflation trade will not be easy and will require a constant drip feed of supporting evidence – be it softer price or weaker activity data,” said analysts at ING, in a note.