The dollar index firmed up above 102 on Tuesday as investors look ahead to a highly-anticipated interest rate decision from the Federal Reserve this week, but the currency is still headed for its fourth straight monthly decline amid growing fears of a US recession and bets for a slower pace of central bank policy tightening. The Fed is widely expected to deliver a smaller quarter-point increase on Wednesday, while investors will be watching for clues on the path for interest rate rises.
Data released on Friday showed that the Fed-preferred core PCE inflation measure in the US slowed to an over one-year low in December, supporting the case for a smaller hike. US consumer spending also declined more than expected in December, indicating a slowing economy at the end of last year, with most analysts expecting a mild recession by the second half of 2023. The Bank of England and the European Central Bank are set to decide on monetary policy this week as well.
