The Dollar held steady on Monday ahead of the Federal Reserve’s meeting this week.

The Dollar index, which measures the currency against six peers, stood at 103.53 at the time of writing, little change from close to the six-week high of 103.82 reached last week.

The index is on track for a 2% rise in January as traders moderate their forecasts of early rate cuts, Reuters news agency reports.

“Speculation about the near-term path for interest rates continues to be the dominant factor driving financial market moves,” stated Lloyds Bank economist Nikesh Sawjani.

“The Fed currently faces a US economic picture that sees economic activity still holding up better than expected even though inflation measures continue to move down. That hardly suggests that the economy urgently needs rate cuts.

Investors will be focused on the Fed’s policy announcement on Wednesday, with the bank predicted to stand pat on rates.

“We do not expect the Fed to rush on rate cuts at this meeting, which is likely to keep the USD firm across the board,” according to Roberto Mialich, global FX strategist at UniCredit Bank.

Elsewhere, the Euro declined 0.1% at $1.0838 and was moving close to a 2% fall for January. Last week, the European Central Bank (ECB) held rates at a record 4% high and reiterated its commitment to the fight against inflation.

That said, traders are hiking bets the ECB will slash rates from April, with around 140 basis points of easing priced in for 2024, the Reuters report adds.

On Monday, the vice-president of the ECB, Luis de Guindos said the bank will reduce rates sooner or later, taking into account eurozone inflation developments.

In addition, Sterling was trading at $1.2703 at the time of writing, flat on the day before Thursday’s Bank of England policy announcement.