US Dollar Index advances to near 99.00 ahead of Fed policy decision

• US Dollar Index gains ground despite the increased likelihood of a 25-basis-point Fed rate cut on Wednesday.
• Traders await signals from Fed Chair Powell's post-meeting speech on the pace of future easing.
• President Trump said in South Korea that his upcoming meeting with President Xi will lead to a "great deal."

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining ground after two days of losses and trading around 98.90 during the Asian hours on Wednesday. The Greenback could face challenges as traders expect the Federal Reserve (Fed) to deliver a rate cut later in the North American session.

The Fed is widely expected to lower interest rates by another quarter point, bringing the benchmark rate to 3.75-4.00%, at its October meeting. The CME FedWatch Tool indicates that markets are now fully pricing in a Fed rate cut in October and a 91% possibility of another reduction in December.

Traders will be looking forward to any signals from Fed Chair Jerome Powell's speech at the post-meeting conference regarding the pace of future easing. The October CNBC Fed Survey also indicates that the Fed could implement additional rate reductions over the next two meetings.

US President Donald Trump stated in South Korea on Wednesday that the Federal Reserve will not raise interest rates. Trump projected that investments totaling around $21-$22 trillion would flow into the United States (US) by the end of his second term and forecast 4% GDP growth in the next quarter, noting that factories across the country are booming.

President Trump also noted that Chinese President Xi will arrive tomorrow, expressing optimism that the meeting will result in a "great deal" for both the US and China. The US Dollar could gain further support if the two leaders agree on a framework that halts additional US tariffs and China's restrictions on rare earth exports. Meanwhile, the ongoing US government shutdown has entered its fifth week, delaying the release of key economic data crucial for guiding monetary policy decisions and shaping market expectations.