The U.S. dollar (DXY index) faced marginal declines in late afternoon trading in New York on Wednesday, despite the uptick in U.S. Treasury yields following the release of the minutes from the Jan. 30-31 FOMC meeting.

As outlined in the condensed meeting notes, policymakers were of the view that it would be premature to initiate interest rate reductions until they were more confident that consumer prices were steadily approaching the 2.0% target.

Jerome H. Powell, the Federal Reserve chair (The New York Times)

The central bank's insistence on requiring further evidence of disinflation before lifting policy constraints indicates that the easing process is unlikely to begin imminently and could potentially be postponed to the latter part of the year.

Should the Federal Reserve opt to postpone its interest rate adjustments, there is a possibility of U.S. bond yields inching upwards in the short term, thereby potentially bolstering the U.S. dollar. This scenario could lead to the DXY index achieving new annual highs by March.

Given the ongoing upward trajectory of the U.S. dollar, currency pairs such as EUR/USD and GBP/USD may encounter challenges in gaining momentum in the upcoming days and weeks. Conversely, pairs like USD/JPY and USD/CAD may encounter less resistance in their upward movements.

Souce: https://www.dailyfx.com/