Financial markets are focused on this week’s Federal Reserve policy meeting, with investors widely expecting the central bank to signal a potential rate cut amid signs of moderating inflation and slowing labor market growth.
The U.S. dollar traded near a two-week high against the Japanese yen on Monday, supported by cautious optimism that the Fed’s policy shift will be gradual rather than aggressive. Traders noted that the greenback’s strength also reflects renewed demand for safe-haven assets ahead of key U.S. economic data releases.
Analysts expect the Fed to keep rates unchanged at this meeting but to lay the groundwork for an easing cycle beginning in December or early 2026. Markets are pricing in a roughly 70% probability of a 25-basis-point cut at the next meeting, according to CME FedWatch data.
Meanwhile, the Japanese yen continues to face pressure from the Bank of Japan’s ultra-loose monetary stance, which remains largely unchanged despite rising domestic inflation. The widening policy divergence between the Fed and the BOJ has kept the yen near multi-decade lows.
