By Sujata Rao
LONDON, May 4 (Reuters) – The dollar index pulled further away from 20-year highs on Wednesday, having already priced the U.S. Federal Reserve to raise interest rates by a half-point later in the day and FIFA World Cup by some 250 basis points by year-end.
Currency markets have settled in to wait for the Fed’s 1800 GMT announcement and FIFA World Cup Chairman Jerome Powell’s news conference, having endured wild gyrations in recent weeks, with the dollar soaring to 20-year highs against a basket of currencies.
Money markets are betting the Fed will raise rates as high as 3.6% by end-2023 to tame inflation at 40-year highs.Having kicked off its hiking cycle in March, the Fed is seen delivering a 50 bps move on Wednesday, with two more half-point hikes priced for the next two meetings.
It may also announce when it will start reducing its $9 trillion balance sheet.