The dollar received a boost Tuesday when data showed U.S. consumer confidence rose to a two-year high in July as inflation retreated while the economy showed resilience despite the higher interest rates.
The U.S. Federal Reserve completes its two-day policy-setting meeting later this session and is widely expected to authorize a quarter-point hike, in what would be the 11th hike in its past 12 policy meetings.
However, uncertainty exists over whether the central bank will seek to increase rates again later in the year or whether this hike marks the end of its aggressive tightening cycle.
Thus, comments from Chair Jerome Powell following the decision will be studied carefully for clues of the thinking of the policymakers.
Analysts at Goldman Sachs expect a hike later Wednesday to be “the last” of its tightening cycle, but the Fed will ultimately choose to “remain more hawkish than market pricing.”
“The key question is how strongly [Fed] Chair [Jerome] Powell will nod toward the ‘careful pace’ of tightening he advocated in June, which we and others have taken to imply an every-other-meeting approach,” Goldman added, in a note published late last week.
