During today's Asian trading, the US dollar consolidated against major currencies, while investors eyed escalating tensions in the Middle East and prepared for meetings of the Bank of Japan, the Federal Reserve and the Bank of England.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.05% to 104.25. Gradually, the focus is shifting to the Fed meeting, the results of which will be announced on Wednesday. Overall, the latest US data should strengthen policymakers' confidence that inflation is approaching the 2% target, and therefore attention is likely to focus on achieving a "soft landing" of the economy. Economists expect the FOMC's July meeting to lay the groundwork for a rate cut as early as September as policy starts shifting from restrictive territory to something more neutral. According to the CME FedWatch Tool, markets see a 100% probability of a rate cut in September, and a 100% probability of monetary policy easing in November.
The yen rose 0.25% against the U.S. dollar after posting its biggest weekly gain since late April last week. The key event of this week for the yen will be the meeting of the Bank of Japan, which ends on Wednesday. Markets will focus on whether the central bank will take (and what exactly) steps to normalize its monetary policy. Recent economic indicators have been mixed, indicating that economic growth is still uneven. Amid mixed activity and sentiment data, as well as a modest acceleration in wage and price growth, the Bank of Japan is expected to refrain from raising rates at its July meeting, but is likely to provide a detailed plan to reduce the pace of bond purchases over time. In addition, the Bank of Japan will publish an updated forecast for economic growth and inflation. Any significant increase in medium-term inflation forecasts may portend further rate increases. In general, it is expected that the next rate hike will occur in October - by 15 basis points, to 0.15%-0.25%.