The dollar extended gains against its chief rivals Wednesday after a spate of strong data on the U.S. housing market and consumer-price inflation. Investors now turn their attention to the Federal Reserve. Financial markets are bracing for any potential surprises from the central bank, which isn’t expected to budge monetary policy just yet. Construction on new houses rose to a five-month high in February, driven by the largest increase in single-family homes in nine years. Meanwhile, core CPI rose 0.3% last month — a sign that inflation continues to rise toward the Fed’s target of an annual rate of just below 2%. Inflation stirred in January after lying dormant for several years. The ICE U.S. Dollar index DXY, +0.39% a measure of the buck’s strength against a basket of six rival currencies, was up 0.3% at 96.92. A report on last month’s industrial production is set to be released at 9:15 a.m. Eastern. The Fed’s widely expected inaction leaves currency traders hypersensitive to any guidance on when the U.S. central bank might deliver its next typically dollar-supportive hike in interest rates. The U.S. has slowed its response to an improving domestic economy due to wavering global growth and scant sign of dangerous inflation, but a “bias� toward tightening at the Fed continues to contrast looser policies in Europe, Japan and elsewhere. Most recently, the Bank of Japan on Tuesday skipped a chance to expand its asset-buying program even as it offered a darker view of the economy. In comments Wednesday, Bank of Japan Governor Haruhiko Kuroda said there is room to cut interest rates to around minus 0.5%. The dollar was fetching 113.67 yen USDJPY, +0.45% compared with ¥113.02 late Tuesday in New York. The buck remains down 0.1% on the week. The euro EURUSD, -0.4051% traded at $1.1082, compared with $1.1107 Tuesday. “Following the unexpected and volatile responses to the [European Central Bank’s] and [Bank of Japan’s] recent monetary policy upgrades, the tension surrounding the already high-profile Fed meeting is almost painful,� said John Kicklighter, chief currency strategist at FXCM, in a note. Fed policy makers are expected to wrap up a two-day meeting and make an announcement at 2 p.m. Eastern, with the CME Group’s FedWatch tool giving a 0% chance of an interest-rate hike. For the Fed on Wednesday, “the probability of a change to rates to follow December’s ‘liftoff’ is particularly low,� Kicklighter said. “However, that doesn’t ease the pressure in this event risk. Beyond accounting for a non-negligible hawkish surprise, we have a more detailed update from the U.S. central bank that includes a press conference from Chairwoman Yellen and forecasts.� Fed chief Janet Yellen is slated to hold a news conference at 2:30 p.m. Eastern. Read: U.S. dollar poised to gain 10% or better, even if Fed holds on rates Check out: MarketWatch’s Economic Calendar Any hints that the Fed intends to raise rates two or three times this year could send the dollar flying. Conversely, any dovish indicators could pin down the buck, which remains broadly higher over the medium term against its primary rivals but has struggled to build on its gains since the start of the year. The dollar may not gain significantly, however. Consider that a notably hawkish Fed could nick stock and commodity prices, luring currency traders into the yen and Swiss franc,considered haven currencies, and depressing the dollar in these trading pairs. Sterling fell 0.6% to $1.4067 GBPUSD, -0.5936% losing ground even after U.K. government data showed faster-than-expected wage growth. The pound continues to swivel amid mixed views on whether Britain would leave the European Union in a June referendum. The latest fall in the pound was driven by a poll suggesting supporters of “Brexit� had overtaken those who wanted to stay in the EU, analysts said. The British currency traded at $1.4155 late Tuesday in New York. Read: The swiss franc is your best bet for “Brexit� protection In other markets, U.S. stocks are pointing higher with participants unwilling to stick their necks out ahead of the Fed release. Oil futures CLJ6, +2.81% traded higher after an encouraging report on inventories from an industry group. European stocks SXXP, -0.10% gained, while Asian markets closed mixed. Gold futures GCJ6, -0.13% advanced.

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