Currencies: Dollar inches higher ahead of Fed decision, British pound falls on Brexit extension talk

The U.S. dollar bucked its recent downtrend on Wednesday ahead of the Federal Reserve’s monetary-policy update.

The central bank is the main focus of Wednesday’s session, with other themes like Brexit and U.S.-China trade talks in the background. The Fed’s interest-rate decision is due at 2 p.m. Eastern, followed by a news conference with Fed Chairman Jerome Powell at 2.30 p.m.

See: In press conference, Powell to emphasize economy strong enough not to need a rate cut

“The rhetoric since the December forecasts ha changed dramatically. Today’s meeting is about realigning the two. This means that growth and inflation forecasts will be lowered,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

Check out: Fed seen revealing ‘how and when’ it will stop shedding balance sheet assets

Also read: Here are 3 things to watch when the Fed unveils its latest dot plot

Investors will focus on the dot plot after the December median forecast was lowered to two hikes in 2019, from three before.

The ICE U.S. Dollar Index DXY, -0.35%  was up 0.1% at 96.476, after spending seven of the past eight sessions in the red, according to FactSet.

The euro EURUSD, +0.5197% the greenback’s biggest rival, was little changed at $1.1352.

Meanwhile, the British pound GBPUSD, -0.3015%  extended its losses and dropped to a one-week low, after Prime Minister Theresa May requested the March 29 Brexit deadline to be extended to June 30. This would likely allow the British Parliament to vote for a third time on a version of May’s Brexit deal.

The pound last fetched $1.31577 down from $1.3268 late Tuesday. Between its session-high and low, sterling swung 1% on Wednesday.

According to a Reuters report, the European Union is concerned about a delay that leave the U.K. in the Union throughout the May EU elections, and advised the premier against it. On Monday, the speaker of the House of Commons blocked a third vote, ruling that the government would have to change the deal before putting it to a vote again. President of the European Council Donald Tusk said Parliament would have to approve May’s deal first before getting a short extension.

Check out: The risk of a long Brexit delay is on the rise

In U.K. economic data, inflation came in stronger than expectations at 1.9% year-over-year in February, compared with 1.8% expected. Core inflation, meanwhile, slipped to 1.8% year over year.

On Thursday, Bank of England policy makers meet. The central bank is considered to have its hands tied until Brexit is resolved or a clear path has emerged.

Also read: The Indian rupee just sent investors a ‘warning’ on emerging markets: analyst

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