The US dollar is under pressure as investors brace for a key federal reserve decision this week. With global markets on edge and trade tensions lingering, all eyes are on what Fed Chair Jerome Powell says next—and what it could mean for the world’s biggest assets. The stakes are massive for everyone. 

Advertisment

The US dollar started the week under pressure, with the dollar index slipping amid rising uncertainty surrounding US-China trade dynamics and growing anticipation ahead of the Federal Reserve’s policy meeting on Wednesday.

Despite stronger-than-expected US nonfarm payrolls data in April and elevated consumer inflation expectations, markets are closely watching for signals from the Fed about the future rate path.

How will the Fed trigger markets?

Advertisment

The Fed is widely expected to hold rates steady at 4.25 per cent – 4.50 per cent. However, investor attention is sharply focused on the tone of the policy statement and Fed Chair Jerome Powell’s press conference.

Markets are seeking clarity on whether the Fed will maintain its current stance or pivot in response to economic indicators and external pressures, including trade disruptions from Trump's tariffs.

A more hawkish Fed could strengthen the dollar and pressure equities and emerging markets. In contrast, a dovish tone could support risk assets, weaken the dollar further, and bolster demand for gold and other safe-haven plays.

Advertisment

Trump’s trade rhetoric and the lack of direct communication with China’s leadership only heighten investor anxiety. But any escalation or breakthrough could quickly shift global sentiment.

For now, all eyes remain on the Fed. Its stance will likely set the tone for global asset performance heading into the next quarter.

(With inputs from the agencies)