USD Weakens 0.21% Pre-FOMC on Soft Housing Data

The dollar index declined 0.21% ahead of the Federal Reserve's policy announcement, pressured by weaker-than-expected US housing data. May housing starts fell to 1.256 million units, significantly below the 1.357 million forecast, signaling potential cooling in the residential construction sector. The disappointing data fueled speculation about the Fed's economic outlook and potential policy adjustments. Major pairs capitalized on dollar weakness, with EUR/USD and GBP/USD posting modest gains during the session. Market participants remained cautious, limiting position sizes ahead of the FOMC statement and Powell's press conference. Technical indicators showed the dollar index testing support near recent lows, with a break below potentially accelerating losses. The housing data adds to mixed economic signals, complicating the Fed's policy calculus as it balances growth concerns against inflation objectives.