The US dollar edged higher on Monday, trading in a narrow range, as investors remained cautious ahead of key policy decisions this week from several central banks. The Fed is expected to hold interest rates for the first time since January 2022.
Monetary policy meetings at the Fed, European Central Bank (ECB) and Bank of Japan (BOJ) will set the outcome for this week with markets looking for clues from policymakers on the future path of interest rates.
May U.S. inflation data was also released on Tuesday before the Fed began its two-day meeting.
"With evidence of a modest US economic slowdown accumulating, investors are betting that tomorrow's inflation print is more likely to be weaker than expected and that helps reduce the likelihood of an aggressively aggressive response from Fed officials on Wednesday," Schamotta added.
The money market tends towards the view that the Fed will stop raising its rates. These expectations jumped to a 13-month high on Friday as risk sentiment improved.
On the other hand, a majority of economists polled by Reuters expected the ECB to raise its key rate by 25 basis points this week and again in July, before pausing.
The US dollar index posted a gain of almost 0.05% against six major currencies at a trading level of 103.230. The euro strengthened 0.06% to $1.0754, after rising 0.4% last week, its first weekly gain in about a month.
Elsewhere, the yen was unchanged at 139.35 per U.S. dollar, ahead of a policy meeting by the BOJ, which is expected to maintain ultra-loose monetary policy and forecast a moderate economic recovery, as robust corporate and household spending curbed the effects of a slowdown overseas.
