Forex Today: Fed rate decision and revised dot plot to ramp up volatility

Here is what you need to know on Wednesday, June 17:

Markets cling to a cautious stance in the European morning on Wednesday as investors gear up for the Federal Reserve's (Fed) monetary policy announcements. The Eurostat will publish revisions to the May Harmonized Index of Consumer Prices (HICP) inflation data and the US economic calendar will feature Retail Sales figures.

Following Monday's risk rally, Wall Street's main indexes traded mixed on Tuesday as the details surrounding the framework agreement between the United States (US) and Iran remained vague. In the late American session, Iran's foreign minister said that the next round of negotiations will start on the same day that sides sign the Memorandum of Understanding (MoU) and added that talks will continue for 60 days to reach a final agreement, which will include nuclear issues and lifting of the sanctions.

In the meantime, Iran's Top Joint Military Command, ​Khatam al-Anbiya Central ‌Headquarters, responded to Israel's latest attack in southern Lebanon, warning that Israel should expect a hard response if it did not stop its attacks.

In a joint statement published early Wednesday, the leaders of the G7 countries said that they will strengthen sanctions against Russia, including those on the oil and gas sectors, and added that they will make efforts to diversify energy supply routes and reduce dependence on the Strait of Hormuz and increase energy stocks.

After posting marginal losses on Tuesday, the US Dollar (USD) Index holds steady at around 99.50 on Wednesday. Markets widely expect the Fed to leave its monetary policy settings unchanged. The revised Summary of Economic Projections (SEP) and Fed Chair Kevin Warsh's comments in his first post-meeting press conference could provide key clues regarding the interest rate outlook and ramp up market volatility.

The UK's Office for National Statistics (ONS) reported on Wednesday that annual inflation, as measured by the change in the Consumer Price Index, remained unchanged at 2.8% in May. On a monthly basis, the CPI rose 0.2% following the 0.7% increase recorded in April and below the market expectation of 0.4%. Other details of the report showed that the Retail Price Index rose 3.1% on a yearly basis, compared to 3% in April, and the Producer Price Index - Input was up 8.7% in this period. After rising quickly with the immediate reaction to inflation data, GBP/USD lost its traction and it was last seen trading virtually unchanged on the day at around 1.3420.

Gold (XAU/USD) held its ground following Monday's upsurge and registered small gains on Tuesday. In the European morning on Wednesday, XAU/USD stays in a consolidation phase above $4,300.

EUR/USD moves sideways slightly above 1.1600 after posting small gains for two consecutive days.

The Japanese Yen failed to benefit from the Bank of Japan's decision to raise the policy rate by 25 basis points on Tuesday and ended the day marginally lower against the USD. USD/JPY fluctuates in a narrow range above 160.00 in the European morning on Wednesday.

AUD/USD struggles to gain traction and trades at around 0.7050 following Tuesday's choppy action.