Forex Today: US Dollar extends losses ahead of Fed decision as Middle East tensions escalate

Here is what you need to know for Wednesday, March 18:

The US Dollar (USD) lost its firmness and is now on a two-day losing spree. The Greenback initially fell because investors were cautious over the Middle East war and Wednesday's Federal Reserve (Fed) monetary policy decision. The USD remained under pressure after comments from United States (US) President Donald Trump, who informed us through Truth Social that US NATO allies don’t want to get involved in the US military operation in Iran. He went on to name Japan, Australia and South Korea, claiming the US no longer needs their support.

The US Dollar Index (DXY) is trading near the 99.60 price region, continuing to lose ground as investors part ways with the Greenback amid intensifying conflicts in the Middle East and the upcoming Federal Reserve (Fed) interest rate decision.

EUR/USD is trading near the 1.1530 level, recording little gains throughout the day but is mildly bullish for two days in a row. The German ZEW Economic Sentiment report for March showed sentiment fell to -0.5 from 58.3 in February amid inflation fears. The European Central Bank (ECB) is meeting on Thursday and is expected to maintain interest rates on hold at 2%.

GBP/USD is trading near the 1.3350 price zone, as the Great British Pound (GBP) gains ground for a second consecutive day over a weak USD. The Bank of England (BoE) is expected to deliver a hawkish hold on Thursday.

USD/JPY is trading near the 159.00 level, sliding for a second consecutive day, even as the Japanese Yen (JPY) takes little advantage of the USD's decline.

AUD/USD has surged above the 0.7110 level, almost trimming back all of last week’s losses, even after a split vote in the Reserve Bank of Australia (RBA). The RBA hiked rates by 25 basis points, but the Aussie fell because five of nine voting members favoured the rate hike, while the remaining four were against it.

Oil is trading at $96 per barrel, trimming back almost all of its intraday gains but still capitalizing on the Strait of Hormuz blockage.

Gold is trading at $4,996, little changed throughout the day, as higher US government bond yields are more attractive to investors.

What’s next in the docket:

Wednesday, March 18

• EUR Core Harmonized Index of Consumer Prices (YoY) (Feb)
• USD Producer Price Index (Feb)
• CAD BoC Interest Rate Decision
• US Factory Orders (MoM) (Jan)
• US Fed Interest Rate Decision
• US FOMC Economic Projections
• NZD Gross Domestic Product (YoY) (Q4)

Thursday, March 19

• AUD Employment Change s.a. (Feb)
• JPY BoJ Interest Rate Decision
• UK Employment Change (3M) (Jan)
• UK BoE Interest Rate Decision
• CHF SNB Interest Rate Decision
• EUR ECB Interest Rate Decision
• USD Initial Jobless Claims
• USD Philadelphia Fed Manufacturing Survey (Mar)
• USD New Home Sales Change (MoM) (Jan)
• NZD Westpac Consumer Survey (Q1)
• NZD Trade Balance NZD (YoY) (Feb)

Friday, March 20

• CNY PBoC Interest Rate Decision
• EUR Producer Price Index (YoY) (Feb)
• CAD Retail Sales (MoM) (Jan)