Traders price in 32 bps of Fed tightening by year-end but await key US jobs and inflation data for further direction.
The US dollar remains supported after the Federal Reserve’s hawkish dot plot, with markets pricing in 32 bps of additional tightening by year-end. A 29% chance of a July hike and 62% probability for September reflect elevated rate expectations, though recent dovish repricing has emerged amid falling oil prices and potential near-term peaks in hawkish sentiment.
Recent moves in USD/JPY suggest profit-taking rather than outright intervention, as the pair nears 2024 highs. The Bank of Japan held rates at 1.00% and paused bond tapering, maintaining its gradual normalization stance. Forward guidance remains unchanged, with further rate hikes expected.
Consolidation or pullbacks may occur without fresh catalysts ahead of critical US nonfarm payrolls and CPI reports, which could determine the dollar’s next move.