Where is the US dollar pointing? The market holds its breath waiting for the minutes of the Fed meeting, and the window for a rate cut in June may open.

Due to the Lunar New Year holidays in most Asian markets and the just-ended Presidents' Day holiday in the US, trading activity in the markets has been light. Later this week, there will be important economic events, including the release of minutes from the last Federal Reserve meeting and preliminary data on US Gross Domestic Product. The market is waiting for signals on when the Fed might cut interest rates, expected to be released later this week. "We are quite optimistic about the US economy," said Christine Clifton, Senior FX Strategist at the Commonwealth Bank of Australia in Sydney. "The market is currently expecting a high likelihood of a rate cut in June, which is also our view. However, the difference between us and the market is that we expect another rate cut to follow in July." She added, "We believe that the most important driver of the US dollar trend in 2026 will be the narrative of American exceptionalism." The US dollar index, which measures the dollar against a basket of currencies, was largely unchanged at 97.12, rising 0.2% from the previous trading day. The euro fell by 0.06% to $1.1843. The yen rose by 0.15% to 153.28 yen per dollar. The pound fell by 0.07% to $1.3616. According to data from last Friday, the Consumer Price Index (CPI) in the US for January was lower than expected, providing more room for the Fed to further ease policies this year. Currency market traders expect the Fed to cut rates by 62 basis points for the remainder of the year, meaning two 25 basis point cuts with a probability of around 50% for a third cut. The next rate cut could occur in June, with an 80% likelihood of a 25 basis point cut. The Federal Open Market Committee will release minutes from its January meeting on Wednesday local time. Other key data this week include inflation data from the UK, Canada, and Japan, as well as preliminary data on global business activity on Friday. In addition, the yen recovered some of its losses from the previous day following disappointing economic data from Japan, leading to expectations of increased stimulus measures by the government. The Australian dollar slightly edged lower after the release of minutes from the Reserve Bank of Australia's February meeting. On Monday, the yen's recent uptrend stalled as official data showed minimal growth in the Japanese economy in the previous quarter, achieving only a 0.2% annualized growth. The Australian dollar fell by 0.07% to $0.7064. The New Zealand dollar fell by 0.08% to $0.6026, and the Reserve Bank of New Zealand is expected to keep interest rates unchanged at its policy meeting on Wednesday. The Reserve Bank of Australia believes that if interest rates were not raised as actually implemented this month, inflation would continue to remain high, and it is currently uncertain whether further policy tightening is needed. Minutes from the RBA's board meeting last month showed that members were concerned about the "significant shift" in the risks facing their inflation and employment targets. In the cryptocurrency market, Bitcoin rose by 0.05% to $68,881.72, while Ethereum remained steady at $1,999.11.