Where is the US dollar pointing to? The market holds its breath and waits for the minutes of the Federal Reserve meeting. The possibility of a rate cut in June may be opening.

Due to the Lunar New Year holiday in most Asian markets and the just-ended Presidents' Day holiday in the United States, trading in the markets has been thin. Later this week, there will be important economic events, including the minutes of the last Fed meeting and preliminary GDP data for the United States. The market is waiting for signals expected to be released later this week about when the Fed might cut interest rates. "We are quite optimistic about the U.S. economy," said Christina Clifton, senior forex strategist at the Commonwealth Bank of Australia in Sydney. "The market is currently expecting a high probability of rate cut in June, which is also our view. However, the difference between us and the market is that we expect another rate cut in July." She added, "We believe that the most important driver of the USD trend in 2026 will be the narrative of the US exceptionalism." The US Dollar Index, which measures the USD against a basket of currencies, was basically flat at 97.12, up 0.2% from the previous trading day. The euro fell 0.06% to $1.1843. The yen rose 0.15% to 153.28 yen per dollar. The pound fell 0.07% to $1.3616. According to data from last Friday, the Consumer Price Index (CPI) in the United States in January was lower than expected, providing more room for the Fed to further ease policy this year. Currency market traders expect the Fed to cut rates by 62 basis points for the rest of the year, meaning two 25 basis point cuts, with a probability of about 50% of a third rate cut. The next rate cut may be in June, with an 80% chance of a 25 basis point cut. The Federal Open Market Committee of the Fed will release the minutes of its January meeting on Wednesday local time. Other key data this week includes inflation data from the UK, Canada, and Japan, as well as preliminary global business activity data on Friday. In addition, the yen recovered some of its losses from the previous day as disappointing economic data from Japan raised expectations of increased stimulus from the government. The Australian dollar slightly weakened after the release of the minutes of the Reserve Bank of Australia's February meeting. On Monday, the yen's recent rally paused as official data showed the Japanese economy barely grew in the previous quarter, with an annualized growth rate of only 0.2%. The Australian dollar fell 0.07% to $0.7064. The New Zealand dollar fell 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 are not raised as expected this month, inflation will remain high, and it is uncertain whether further tightening of policy is needed. Minutes from the RBA's board meeting last month showed that members were concerned that the risks to its inflation and employment targets had "significantly shifted." In the cryptocurrency market, Bitcoin rose 0.05% to $68,881.72, while Ethereum remained basically unchanged at $1,999.11.