The US Dollar Index (DXY) traded near 99.00 on Wednesday after the Federal Reserve kept interest rates unchanged. It was Chairman Jerome Powell’s last meeting as Fed chair.
The decision passed 8–4, the most divided FOMC vote since October 1992. Stephen Miran dissented for a quarter-point rate cut, while Beth Hammack, Neel Kashkari, and Lorie Logan supported holding rates but opposed adding an easing bias to the statement.
Geopolitics And Market Reactions
US President Donald Trump said he would maintain a blockade in the Strait of Hormuz if Iran does not accept his nuclear terms. He also said he “Will knock out the rest of the missiles and systems if we don’t make a deal with Iran.”
EUR/USD fell towards 1.1660, with markets focused on Thursday’s ECB meeting. GBP/USD slipped towards 1.3470 ahead of the Bank of England decision due Thursday.
USD/JPY traded near a two-year high at 160.40. USD/CAD was near 1.3680 after the Bank of Canada left rates unchanged.
WTI rose to $106.95 per barrel, while gold fell towards $4,540 amid a firmer dollar. The UAE said it will leave OPEC, with limited impact on oil prices.
Thursday’s diary includes China PMI, French Q1 GDP, eurozone ECB rates, Canada February GDP, and US Core PCE, Q1 GDP, jobless claims, and income data. Friday includes Australia PPI, Switzerland retail sales, Canada manufacturing PMI, and US ISM manufacturing PMI.
Looking Back And Looking Ahead
Looking back to this time in 2025, we saw a very divided Federal Reserve delivering Jerome Powell’s final meeting with a hawkish hold. This decision, combined with geopolitical tension, sent the US Dollar Index soaring near 99.00. That strength pushed USD/JPY to a peak of 160.40, a level that has proven to be remarkably persistent over the last year.
The dollar’s dominance continued through much of 2025, but the landscape is now shifting in April 2026. With recent core PCE inflation figures finally cooling to 2.8%, chatter about the Fed’s first rate cut is growing louder, with markets pricing in a 75% chance of a cut by the third quarter. Traders should consider options strategies that profit from a potential decline in the dollar, as this pivot marks a significant change from last year’s hawkishness.
Last year’s surge in WTI crude to over $106 a barrel was a direct result of threats to the Strait of Hormuz. While those specific tensions have eased, the market remains tight, with WTI currently trading near $85 a barrel. Last week’s EIA report showed a surprise crude inventory drawdown of 2.5 million barrels, suggesting demand is robust, and any new supply disruption could send prices climbing again.
The USD/JPY pair is a key focus, as the 160 level we saw in 2025 is once again being tested. The interest rate difference between the US and Japan remains wide, providing underlying support for the pair. Derivative traders should be cautious of direct intervention from Japanese authorities but could use options to trade the high volatility expected around this historic level.
Gold took a hit this time last year, falling as the dollar strengthened. Now, the opposite scenario is taking shape, with gold trading firmly above $3,800 an ounce. With the Fed poised to cut rates and central banks like China’s continuing their strong buying trend—adding 160,000 troy ounces in the first quarter of 2026 alone—the environment looks increasingly supportive for gold bulls.
