DXY: US Dollar Languishes Near Three-Year Low. Here’s What Can Move It This Week.

Expect FX markets to get jumpy this week with a bunch of big economic updates, including the interest rate decision by the Fed.

👀 Dollar Stuck — For How Long?

• The US dollar index DXY has slipped to its lowest level in three years, hovering near 98.00, as global traders brace for a high-impact week stuffed with big market movers. With the Fed expected to hold rates steady (this week’s thunder), the greenback lacks a near-term catalyst to do anything interesting.
• But this lull might not last. Here’s what’s about to hit your trading desk: Fed, BoE, and BoJ decisions, all could jolt FX markets back to life. If surprises land, the dollar could either break lower — or find the momentum it’s been missing.
• For now, dollar bulls are sidelined, watching and waiting. Markets are hypersensitive, and even a small data miss could flip the script on rate expectations and shake currency pairs across the board.

🔑 What’s on the Radar: Big Data Drops

• Tuesday kicks things off with the Bank of Japan’s rate decision, likely impacting the USDJPY, which has floated near ¥144.00 lately. The US retail sales, a key read on consumer strength, comes later that day.
• Wednesday is a heavyweight day: UK and Eurozone CPI prints drop hours before the Fed’s interest rate decision, where Jay Powell is widely expected to stay put. Still, any shift in tone could be dollar-moving, especially if the Fed boss hints at any upcoming rate trims.
• Thursday brings the Bank of England’s decision on borrowing costs, also expected to be a hold. Pound traders will be watching for anything that may suggest a rate cut. Meanwhile, US markets are closed for Juneteenth, thinning liquidity and potentially exaggerating reactions elsewhere.

🌍 Crosswinds Could Dictate FX Swings

• The overarching theme this week will likely be the next phase of the Israel-Iran standoff. The two military superpowers are in the heat of a fierce warfare that threatens to derail the already fragile Middle East situation.
• Currencies that are sensitive to war tremors might pull back while the markets flood those corners traditionally more resistant to geopolitical pressures.
• On the watchlist: will the euro sustain its rise and regain $1.16? The Japanese yen is a possible safe-haven currency amid war-fueled uncertainty, and so is the Swiss franc.