The US dollar is trading strong and steady ahead of the FOMC statement due later today, with investors turning hopeful of the Fed offering more details on when it could wind down its monetary stimulus and start increasing interest rates again. At the time of writing, the US dollar index DXY is trading around 96.48.

So far this week, despite trading choppy as traders await central bank decisions, the DXY has already strengthened by 0.5%. Any hawkish tones from Fed policymakers after the conclusion of the last policy meeting of 2021 can drive up more gains in the dollar against other major currencies.

Investors are hoping that the Fed announces an increase in tapering of monthly asset purchases, trimming them by $25-30 billion a month instead of the current level of $15 billion per month. A few weeks ago, Fed Chair Powell had raised the possibility of speeding up withdrawal of monetary stimulus to prevent overheating of the US economy as it rebounds at a faster pace from the coronavirus crisis even as inflation levels soar to multi-decade highs.

Meanwhile, the common currency Euro has fallen close to the lowest levels against the greenback seen in more than a year. GBP/USD is also trading bearish this week after Britain experiences a steady uptick in fresh cases due to the Omicron variant despite bringing back restrictions and curbs, further denting the outlook for the British pound and the economy.

In addition to the Fed, investors are also eyeing monetary policy meetings of the ECB, BOE and BOJ in the coming days. While the ECB and BOJ are likely to maintain their dovish tones, hopes for the BOE to announce a rate hike in the upcoming meeting have declined amid the spike in Omicron cases.