USD Weakens as Major Central Bank Decisions Loom This Week

Global forex markets are exhibiting heightened caution as traders position ahead of critical interest rate decisions from the Federal Reserve, Bank of England, and Bank of Japan scheduled for this week. The US dollar has shown notable weakness, with the DXY index declining approximately 0.5% as market participants increasingly price in a potential 25 basis point rate cut from the Fed on September 17. Current Fed funds futures indicate a 75% probability of easing, up from 60% last week. The anticipated policy divergence between central banks is creating volatility across major pairs, with EUR/USD testing 1.1100 resistance and GBP/USD approaching 1.3200. USD/JPY has retreated to 147.50 as BoJ rate hike speculation intensifies. Traders should monitor upcoming central bank communications closely, as any surprises could trigger significant market repositioning across all major currency pairs.