Dollar Slips Ahead of Fed Meeting, Euro Rises Before German Vote

The U.S. dollar edged lower on Tuesday as investors awaited the Federal Reserve’s latest policy meeting, while the euro strengthened ahead of a key vote on Germany’s stimulus package.

At 05:00 ET (09:00 GMT), the Dollar Index—which measures the greenback against a basket of six major currencies—traded 0.1 percent lower at 102.890, remaining above last week’s five-month low.

Fed Growth Projections in Focus

The dollar has struggled in recent sessions due to concerns that the uncertainty surrounding U.S. President Donald Trump’s tariffs could weigh on economic growth.

Data released on Monday showed that U.S. retail sales rose 0.2 percent in February, rebounding from a revised 1.2 percent decline in January. However, the increase fell short of the 0.6 percent gain expected by economists, suggesting a moderate pace of economic expansion in the first quarter.

Investors are now turning their attention to the Federal Reserve’s two-day policy-setting meeting, which concludes on Wednesday. The central bank is widely expected to keep interest rates unchanged, making its updated economic projections a key focus. These forecasts will provide insights into how policymakers view the potential impact of Trump’s trade policies on the economy.

“The Fed, which announces rates tomorrow, does not appear to be in a position to offer much relief to risk sentiment as rising inflation expectations still warrant caution on rate cuts,” analysts at ING said in a note.

Euro Awaits German Debt Vote

The euro rose 0.3 percent to 1.0951, nearing its highest level since October, ahead of a scheduled parliamentary vote in Germany on a major stimulus package.

Germany’s constitutional court dismissed new legal challenges from opposition parties on Monday, clearing the way for the prospective coalition government to advance a large-scale public borrowing initiative through parliament.

Traders are also watching developments from a phone call between U.S. President Donald Trump and Russian President Vladimir Putin regarding a potential ceasefire in the Ukraine conflict.

“EUR/USD is eyeing 1.100 again. We aren’t convinced there is enough momentum for a decisive breakout, especially if the Fed’s decisions fail to trigger further repricing in the dollar,” ING analysts noted. “Still, the pair could move above 1.0950 today.”

Meanwhile, GBP/USD edged up 0.1 percent to 1.3001, breaking above the 1.30 level for the first time since November. The Bank of England is expected to hold rates steady on Thursday after inflation showed an uptick last month.

Yen Weakens Ahead of Bank of Japan Decision

In Asia, USD/JPY climbed 0.3 percent to 149.70 ahead of the Bank of Japan’s policy decision on Wednesday. The central bank is expected to maintain its 0.5 percent interest rate, despite mounting inflationary pressures and concerns over the economic impact of U.S. trade tensions.

The Chinese yuan remained stable, with USD/CNY trading 0.1 percent lower at 7.2234, following Beijing’s announcement of a new “special action plan” on Sunday aimed at boosting domestic consumption and supporting economic growth.