The US central bank is likely to hike its key rate by 50bp today. In such a case, the US dollar could stage a mild move higher, economists at Commerzbank report.

Developments surrounding the war in Ukraine to limit a possible downside correction

“USD might benefit from the rate decision short-term as there are likely to be some market participants who expect a smaller 25bp rate step. Whether the Fed comments and statements by Powell at the press conference will be sufficiently hawkish to allow USD to appreciate further seems questionable though.”

“Rate expectations have already gone a long way. The market might therefore be disappointed, with the USD correcting downwards. However, developments in connection with the war in Ukraine are likely to limit a possible downside correction.”

See – Fed Preview: Forecasts from 18 major banks, 50bps is universally expected