Big picture
Forex markets are in classic wait-and-see mode. Traders are reluctant to place big directional bets before the release of the latest Federal Reserve minutes and a new round of U.S. inflation data. The dollar index is holding firm, helped by expectations that the Fed may deliver another rate cut only gradually, while real yields remain relatively attractive versus other major economies. At the same time, risk appetite is fragile after choppy moves in equities and commodities, which keeps safe-haven flows alive in the background.

Dollar pressure on majors
The firm U.S. dollar is capping rallies in the euro, pound and commodity currencies. EUR/USD continues to drift lower after breaking important support levels, with many desks now eyeing the 1.14–1.15 area as the next technical battleground. GBP/USD is hovering below recent highs as markets balance softer U.K. inflation figures against the prospect of a still-cautious Bank of England. In the commodity bloc, weaker oil prices are weighing on the Canadian dollar, while the Australian dollar struggles to benefit from local data as global risk sentiment dominates.

The Japanese yen remains one of the weakest links in G10 FX. USD/JPY is trading close to multi-month highs as the gap between U.S. and Japanese yields stays wide and investors question how quickly Tokyo is willing to tighten policy. Comments from Japanese officials continue to warn against “excessive” FX moves, but so far they have done little more than slow the pace of yen weakness. Many macro funds still view modest dips in USD/JPY as opportunities to rebuild long positions, as long as U.S. yields hold near current levels.

What traders are watching
For the Fed minutes, the key question is how confident policymakers sound that inflation is moving back toward target without risking a hard landing in growth. A more hawkish tone, hinting that additional cuts are not guaranteed, would likely support the dollar and pressure risk assets, especially high-beta currencies. By contrast, any language that emphasises downside risks to the labour market or highlights disinflation progress could revive expectations of easier policy and trigger a wave of position-trimming in long-dollar trades.

Beyond the Fed, traders are also tracking global inflation surprises, energy prices and incoming comments from other central banks. If inflation data in the U.S. and Europe continue to cool, it would strengthen the case for a gradual shift away from peak rates, even if no major bank wants to signal victory too early. In the near term, FX markets may remain choppy rather than trending, but once the Fed minutes are digested, volatility could pick up as investors reposition around the next big macro story.