LONDON/SINGAPORE, Feb 1 (Reuters) – The dollar edged lower against the euro on Wednesday ahead of an eagerly-awaited Federal Reserve policy decision with investors hoping the U.S. central bank will signal the end of its interest rate hiking cycle.
After a series of jumbo rate hikes in 2022 to tame inflation, the market expects a quarter-of-a-percentage-point increase in the Fed benchmark interest rate to 4.75%. It would be the smallest increase since the central bank kicked off its tightening cycle 10 months ago with one the same size.
Less clear is whether the central bank will continue to signal further rate hikes as evidence mounts that inflation and the economy are both losing momentum.
The dollar index, which measures the U.S. currency against six major peers, fell 0.15% to 101.96 by 0843 GMT. It also slipped in the previous session, in part because of a report showing U.S. labour costs had increased in the fourth quarter at their slowest pace in a year.
With investors pricing in the Fed reaching the end of its rate-hike cycle, the index is far from the 20-year high of 114.78 it touched on Sept. 28. It has fallen for four straight months.