Image Source: Pixabay
 

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is remaining steady and trading around 98.00 during the Asian hours on Tuesday. Traders are likely to focus on the Federal Open Market Committee (FOMC) December Meeting Minutes due later in the day, for insight into the Fed’s 2026 outlook.

The Greenback could face challenges amid ongoing expectations of two more rate cuts by the Federal Reserve (Fed) in 2026. The CME FedWatch tool shows an 83.9% probability of rates being held at the Fed’s January meeting, up from 80.1% a week earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 16.1% from 19.9% a week ago.

The US central bank lowered interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.

Risk sentiment sours amid persistent geopolitical risks. Uncertainty also returned over efforts to end the war in Ukraine, with Russia’s foreign minister saying Moscow’s negotiating stance would shift following alleged strikes on President Putin’s residence.

In the Middle East, Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the United States (US), Europe, and Israel have raised fears of broader instability, with Trump warning of further strikes if Iran resumes rebuilding its nuclear programme.

More By This Author: