By Peter Nurse

Investing.com – The US dollar gained positions early in Europe on Tuesday, but has struggled to break past five-week lows ahead of the latest Federal Reserve meeting.

By 10:05 AM ET (0505 GMT), the , which tracks the currency against a basket of six other major currencies, was up 0.1% at 103.025, after dipping below 103 for the first time since mid- February.

Ongoing turmoil in the banking sector has weighed on the dollar, as traders have begun to price in the possibility that this banking stress will prevent the Federal Reserve from raising rates much more, or even at all, by the end of the week.

Late on Sunday, the Federal Reserve introduced a seven-day dollar swap to try to ease funding tensions in global markets.

Although use of this mechanism has been limited, the rush to add liquidity to the monetary system is “the most obvious sign” of financial stress and a clear negative for the dollar, according to Alan Ruskin, chief international strategist at Deutsche Bank.

Aside from Wednesday’s release — with a 25 basis point rise the market’s favorite outcome — markets will also be watching what the Federal Reserve says about its $8.6 trillion balance sheet, which has begun to expand again.

The pair rises to 1.0716, awaiting the publication of the March one, which is expected to show a fall from 28.1 to 17.1 points, weighed down by the banking riots.

He raised interest rates 50 basis points last week, but uncertainty in the banking sector could limit the number of hikes the central bank authorizes this year.

“It is clear that financial stability strains could have an impact on demand and, in fact, could do some of the work that monetary policy and interest rate hikes would otherwise do,” the president said on Monday. of the European Central Bank, Christine Lagarde, before the European legislators.

The pair is down 0.2% to the 1.2251 level ahead of the final meeting on Thursday, where it is expected to raise interest rates for the 11th consecutive meeting.

However, British public expectations of the rate have dipped, according to a survey published on Friday by the Bank of England, suggesting that the central bank is about to end its hike cycle.

The pair is down 0.4% to the 0.6690 level, after the Reserve Bank’s March meeting showed that policymakers were considering a possible pause in the rises of the .

The pair is up 0.4% to 131.85, and has reversed some of its recent gains, thanks to its safe-haven status, while the pair fell 0.1% to 6.8743.