The US Dollar Index approached a three-year low before the Federal Reserve interest rate decision, with the market eagerly awaiting guidance on the path of interest rate cuts.

As the Federal Reserve is about to make a decision, the Bloomberg Dollar Spot Index has approached its lowest level since March 2022, falling for the third consecutive day by 0.1%. The market is closely watching the central bank's policy direction and guidance on future interest rate cuts. The euro and the yen are leading major currencies to strengthen against the dollar. Traders are waiting for the Fed announcement while also assessing more details on the interest rate cut path for the year. The Federal Reserve has been holding a two-day monetary policy meeting since Tuesday Eastern Time, against the backdrop of signs of weakness in the labor market - August job growth has significantly slowed, the unemployment rate has risen to its highest level since 2021, and last week's revised data show that annual job growth through March was much weaker than previously expected, causing concerns in the market about a faster deterioration in the labor market. At the same time, President Trump continues to pressure for interest rate cuts, and Fed Chairman Powell's dovish remarks at the Jackson Hole Symposium further strengthen market expectations for rate cuts. Monex analyst John Doyle pointed out that the market is almost digesting the possibility of further interest rate cuts by the Fed every day, with a cumulative 75-basis-point rate cut by the end of the year becoming the new benchmark scenario. Derivatives market traders have fully factored in the expectation of a 25-basis-point rate cut today, with the probability of a 50-basis-point rate cut being extremely low - even if the retail sales data released on Tuesday were stronger than expected, it did not shake this bet, only suggesting that the rate cut will not exceed 25 basis points. Market participants will also focus on the Fed's dot plot, which will reflect policymakers' predictions on the extent of monetary policy easing in the coming months. According to anonymous currency traders, hedge funds have increased their options positions on Tuesday, betting that the US dollar will continue to weaken against currencies such as the euro, yen, and Australian dollar in the coming months. The European Central Bank has no plans for further interest rate cuts, pushing the euro to a four-year high against the dollar as the interest rate differential between the US and Europe continues to narrow. At the same time, the Swiss franc against the dollar has also reached its highest level since 2015.