Dovish Fed Sends USD/JPY Lower, EUR/USD Gains on Dollar Weakness

The US dollar index fell 0.6% to 103.20 as dovish Federal Reserve communications reinforced expectations for policy easing, with USD/JPY declining 0.8% to 146.30 and EUR/USD advancing 0.5% to 1.0875. Fed officials' recent speeches suggest growing comfort with disinflation progress, with markets now pricing a 65% probability of a September rate cut. The yen strengthened across the board as Bank of Japan officials maintained their hawkish rhetoric, widening the policy divergence theme. EUR/USD benefited from both dollar weakness and improved Eurozone sentiment data, with German IFO business climate rising to 89.3. GBP/USD climbed 0.4% to 1.2750, while USD/CHF dropped to 0.8915 on safe-haven flows. Technical analysis shows USD/JPY approaching crucial 146.00 support, with a break potentially triggering stops toward 144.50. The dollar's broad-based retreat reflects shifting monetary policy expectations globally.