• The US Dollar is under pressure as markets are still divided over the size of the Fed rate cut. 
• Traders will sit on their hands until the decision is out, followed by the Fed’s Chair Powell press conference. 
• The US Dollar Index retraces on Wednesday after the prior day’s small bounce. 

The US Dollar (USD) retraces and trades below 101.00, as measured by the US Dollar Index (DXY), ahead of the US Federal Reserve (Fed) interest rate decision on Wednesday. The DXY is under pressure near the yearly lows and faces a key moment, with the Federal Open Market Committee (FOMC) ready to answer how much the Fed needs to cut interest rates. Besides Fed Chairman Jerome Powell’s speech and press conference, the focus will be on the Summary of Economic Projections (SEP), or the Fed’s Dot Plot or Philips curve, where every FOMC member gets a chance to communicate where they see the Fed policy rate move to in the near future. The number of projected rate cuts could be vital in guiding markets in their expectations. 

On the economic data front, some relatively light data points are not set to move the needle ahead of the Fed decision on Wednesday. Markets are still split between a 25 or 50 basis points interest rate cut, so guidance from Fed Chairman Jerome Powell during his speech could shed a completely different light on the matter and might result in a knee-jerk reaction.