**Forex Market Insights: USD Slides as Fed Meeting Looms, Yen Eyes Intervention Levels**
*Original article by Mitrade, available at Mitrade.com*
In the wake of a choppy trading session during Asia’s early hours, the US Dollar faced fresh pressure on Tuesday as traders shifted focus toward central bank policy decisions, particularly the upcoming Federal Reserve interest rate meeting. Market participants are also watching Japan’s currency market closely, as the yen approaches levels where past interventions took place.
Multiple global macroeconomic factors are converging this week, including interest rate decisions from the US Federal Reserve, the European Central Bank (ECB), and the Bank of Japan (BOJ). Each central bank’s stance on inflation management and monetary policy normalization is expected to heavily influence Forex movements in the days ahead.
This article provides a detailed look at current trends in major Forex pairs, central bank policy outlooks, and implications for key currencies like the USD, EUR, GBP, and JPY.
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### Key Forex Market Developments This Week
**1. US Dollar Weakens Before Fed Meeting**
The US Dollar Index (DXY), which tracks USD against a basket of six major currencies, dropped around 0.3% on Tuesday to trade near 104.15. The greenback’s pullback highlights investor hesitation ahead of the Federal Reserve’s policy announcement scheduled for Wednesday.
– Futures pricing suggests traders expect the Fed to hold the benchmark interest rate steady between 5.25% and 5.50%.
– However, markets are closely listening for any hawkish tones from Fed Chair Jerome Powell regarding inflation risks or delays to interest rate cuts.
– Recent US economic data — including CPI and PPI — indicated slowing inflation, supporting expectations for monetary easing by the end of 2024.
– Market-implied probabilities (according to CME’s FedWatch) show a roughly 95% chance of no change in July, but a 62% chance of a rate cut in September.
**2. EUR/USD Gains Amid ECB Anticipation**
The euro strengthened against the US dollar this week, rising to 1.0935 during Tuesday’s European session.
– The ECB is also expected to keep interest rates unchanged during its meeting on Thursday (July 25).
– Investors will focus on commentary from ECB President Christine Lagarde for hints at future rate cuts.
– Eurozone inflation continues to moderate, but economic activity remains weak — a factor that increases pressure for more accommodative policy.
– If the ECB signals further dovishness, EUR gains could be short-lived.
**3. GBP/USD Supported by BOE Tightening Stance**
Sterling held steady above 1.29, reflecting the pound’s recent resilience amid higher-than-expected inflation data released last week.
– UK CPI for June came in at 2.0% year-on-year — matching the Bank of England’s target for the first time in almost three years.
– Yet services inflation remains elevated at 5.7%, prompting BOE rate-setters to approach policy changes cautiously.
– Markets now see a 60% probability of the BOE keeping rates unchanged in August.
– Analysts expect the BOE to deliver at most one cut in 2024, compared to three cuts expected by the Fed.
**4. Yen Weakness Sparks Intervention Concerns**
The Japanese yen dropped to 157.65 against the US dollar on Tuesday, triggering concerns among traders that Japanese authorities may step in to support the currency again. The yen’s weakness continues despite the broad USD softness.
– The BOJ will conduct its next policy review on July 26.
– Japan’s core inflation remains modest, allowing the central bank to keep policy ultra-accommodative.
– However, FX market speculation is rising that the BOJ could take steps to tighten policy slightly or drop yield curve control (YCC) entirely.
– Japan’s Ministry of Finance has previously intervened in the FX market when USD/JPY approached 160. A return to those levels
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