The U.S. dollar steadied Tuesday while the Sterling gained

The U.S. dollar remained firm on Tuesday while the traders waited for the release of U.S. inflation data. The final Federal Reserve meeting of this year is also scheduled this week. Thus, market participants are focusing on new interest rate outlooks.

The greenback will likely change its course based on the Fed’s decision. A month ago, the currency experienced a heavy sell-off after rumors spread about the possible slowing of rate hikes. The agency will release its statement on Wednesday. If the central bank concludes to continue its aggressive hawkish policy, the U.S. dollar will probably rally again.

Analysts expect core inflation in November to be steady at 0.3% month-on-month. At the same time, they see a moderation in the annual pace, stating that headline prices should show a 7.3% rise compared to a year earlier.

Chris Turner, the global head of markets and regional head of research for U.K. & CEE at ING, noted that the Federal Reserve would likely need to see several months of weak inflation data before they can assure markets that everything’s all right. Still, CPI is one of the biggest data releases for Forex markets worldwide. Thus, today is an important day.

The dollar index exchanged hands flat at 104.93 on Tuesday after skyrocketing to a 20-year high of 114.78 in late September. High and rising interest rate expectations supported the currency as the Federal Reserve has increased its benchmark rate to hinder soaring inflation. Unfortunately, that also leaves the currency vulnerable to selling if inflation starts lowering.

Investors expected the peak in U.S. interest rates, but lately, futures pricing is indicating the Fed funds rate will likely stay below 5%. It’s set between 3.75% and 4% currently. The Fed might increase the funds’ rate by 50 basis points (bp) tomorrow.

How are the Euro and British Pound faring?

The euro remained steady at $1.0541 on Tuesday. The Swiss franc traded at 0.9371 per dollar as investors focused on Thursday meetings of the ECB and Swiss National Bank. They expect the central banks to hike rates by 50 bps.

The Sterling soared slightly after labor market data came out mixed. According to the latter, the unemployment rate climbed up a bit, but basic wages also increased by the most, excluding the Covid-19 pandemic period.

The British Pound exchanged hands higher by 0.2% at $1.2296 on Tuesday. The Bank of England (BoE) is meeting on Thursday. Traders are waiting for its policy decision. The Sterling skyrocketed to an almost six-month peak of $1.2345 last week.

Goldman Sachs analysts expect wage growth to remain high despite GDP’s contraction. They think the labor market will also remain tight.

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