The U.S dollar was trading higher against a basket of other major currencies, ahead of the much-awaited Federal Reserve policy statement later in the day. Focus throughout the day will be on the policy meeting statement that is expected to shed more light on the outlook for the U.S economy as well as the timing of the next interest rate hike.

Federal Reserve Policy Statement

While the market expects the Federal Reserve to keep interest rates unchanged, investors will be keen to analyze the central bank reaction to the recent patch in the economy. Traders are pricing in a 62.4% chance that the Fed will hike interest rates at its next policy meeting in June.

The greenback has come under pressure in recent weeks, sentiment having taken a hit on weak economy data and geopolitical tensions in North Korea. The dollar, however, started Wednesday’s trading session on a soft note having risen by 0.01% to highs of 98.79. Against the other six major currencies.

The rally came as a surprise given that the currency traded flat against the other currencies on Tuesday, in anticipation of the Federal Reserve Policy statement. As the day goes on, the dollar is expected to remain in a period of consolidation as traders avoid large dollar positions.

Dollar Weakness

The greenback is trading at lows off its six-week high as fears continue to grip the market about the health of the U.S economy. Weak auto sales in April continues to raise concerns. Jobs data in the coming weeks should help shed more light on the economy’s fundamentals.  The euro and pound strengthening also continues to weigh in on dollar strength.

The euro is closing in on a five-month high of $1.0951 after receiving support on Emmanuel Macron winning the first round of France’s presidential election. Opinion polls show Macron holds a 20-point lead against his rival Marie Le pen ahead of the final vote on Sunday.

“Guys just want to see the final outcome and I think they are going to go into euro and I think primarily euro/yen… that’s going to be their favorite trade,” said OANDA senior trader Stephen Innes.