The global dollar rose while waiting for the Fed’s decisions

He dollar rose this Monday against the main currencies in a volatile session, as investors await decisions on interest rates from the Federal Reserve (Fed), he Bank of Japanhe Bank of England and other key central banks this week.

Markets are pricing in a near 97% chance that the Fed will deliver a quarter-point interest rate cut at the end of its policy meeting on Wednesday, Reuters reported.

The dollar strengthened 0.16% to 0.8945 against the swiss franchovering near its highest level since July. In front of japanese yenthe dollar strengthened 0.31% to 154.12, after rising as high as 154.480 for the first time since November 26.

The yen has struggled to recover against the dollar following its biggest weekly drop since September after Reuters and other media outlets reported that the Bank of Japan would likely keep interest rates steady at the end of its policy meeting on Thursday.

For his part, the euro rose in volatile session after German chancellor Olaf Scholz lost a parliamentary confidence vote, paving the way for early elections in February. The euro rose 0.07% to $1.0509.

He dollar indexwhich tracks the evolution of this currency against six others, rose slightly to 106.88, after reaching 107.16 during the session. The index had hit 107.18 on Friday, its highest level since Nov. 26.

Expectations for the Fed meeting

Operators trust that the Fed will cut the rate by a quarter point on Wednesday, but now expect officials to forego a cut in January, according to CME’s FedWatch tool.

In view of the fact that the inflation remains above the central bank’s 2% annual target, the authorities of the Fed have stated that the recent rallies are part of a bumpy path toward lower price pressures and not a reversal of the disinflationary trend. But analysts say they are also likely to worry about renewed inflation as Trump takes office in January.

“The US economy has been resilient in the face of high interest ratesmeaning the potential for inflation to rise if the economy overheats is an issue the Fed will have to address,” said James Kniveton, a senior currency trader at Convera.

“There is concern that the incoming administration’s policies could be inflationary, but as the Bank of Canada governor commented earlier this month, decisions cannot be based on potential US policy, and (the Fed chair) Jerome Powell can follow their example,” he added.

In fact, investors expect that the Fed’s outlook this week will not incorporate possible future policy changes. “Powell will likely emphasize that it is still too early for officials to factor major policy changes from the new Trump administration into their outlook,” Deutsche Bank analysts said in a note.