• The US Dollar falls slightly on expectations that the Fed will deliver a dovish guidance.
• Investors see the Fed acknowledging progress in inflation and growing risks to labor market strength.
• After the Fed policy, the US NFP report for July will be the key trigger for the US Dollar.

The US Dollar (USD) exhibits a subdued performance in Wednesday’s European session ahead of the monetary policy announcement by the Federal Reserve (Fed) at 18:00 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower to near 104.40. 10-year US Treasury yields remain flat near more than four-month low around 4.14% on expectations that the outcome of the Fed policy will not be favorable for the consistency of the restrictive interest rate framework.

Investors see the Fed leaving interest rates unchanged in the range of 5.25%-5.50% consecutively for the eighth meeting. However, the communication on the interest rate guidance is expected to be dovish due to cooling United States (US) inflationary pressures and moderating labor market strength.

Unicredit Research said in a note, The Fed will likely leave rates unchanged but send a clear signal that it's getting closer to cutting rates and could do so as soon as September.”