Dollar Steadies Ahead of Fed Minutes as Markets Price June Rate Cut

The dollar held steady on Tuesday as currency traders waited for signals from the Federal Reserve about when interest rate cuts might begin. It was a quiet day in the markets—many exchanges across Asia were closed for Lunar New Year, and American markets had just observed President's Day—which meant trading volumes were thin and price movements muted. The real action, traders knew, would come later in the week when the Fed released minutes from its January meeting and the government published preliminary figures on U.S. economic growth.

The dollar index, which tracks the greenback against a basket of six major currencies, barely budged, sitting at 97.12 after a modest 0.2% gain the day before. The euro slipped 0.06% to $1.1843. Sterling weakened slightly to $1.3616. The yen, which had fallen sharply on Monday after Japan reported its economy grew just 0.2% on an annualized basis last quarter, recovered some ground, strengthening 0.15% to 153.28 per dollar. The Australian dollar edged down 0.07% to $0.7064 following the release of minutes from the Reserve Bank of Australia's February meeting, which suggested officials remained concerned about stubborn inflation and uncertain about whether further rate increases would be needed.

What animated the market's thinking, despite the holiday quiet, was the question of American monetary policy. Money market traders were pricing in 62 basis points of rate cuts for the remainder of 2026—essentially two quarter-point reductions with roughly a 50% chance of a third. The consensus view held that the first cut would arrive in June, with traders assigning an 80% probability to a 25-basis-point reduction at that meeting. This pricing reflected data released Friday showing that U.S. consumer prices rose less than expected in January, giving the Federal Reserve room to ease policy without appearing to abandon its inflation-fighting mandate.

Kristina Clifton, senior currency strategist at Commonwealth Bank of Australia in Sydney, said her firm shared the market's view that a June cut was likely, but diverged on what would follow. "We're quite positive on the U.S. economy," she said, adding that Commonwealth Bank expected a second cut in July. She framed the year ahead through the lens of what she called "U.S. exceptionalism"—the idea that American economic strength would be the dominant force moving the dollar through 2026.

The week ahead would test that thesis. The Federal Open Market Committee was scheduled to release minutes from its January meeting on Wednesday, offering insight into how officials were thinking about the inflation outlook and the timing of potential cuts. On Friday, the government would publish advance estimates of gross domestic product for the fourth quarter, along with inflation readings from Britain, Canada, and Japan, plus preliminary data on global business activity. New Zealand's central bank was also set to meet Wednesday, where it was widely expected to hold rates steady. Each of these events carried the potential to shift market expectations about the path of rates and, with them, the relative attractiveness of holding dollars versus other currencies.

The Australian central bank's minutes, released Tuesday, underscored how inflation remained a live concern for policymakers beyond the United States. The RBA noted that inflation would have remained stubbornly elevated if the bank had not raised rates as it did in February, and officials signaled they were not yet confident that further tightening would be unnecessary. The minutes indicated that board members believed the risks to both the bank's inflation and employment mandates had "shifted materially," language suggesting a shift in how officials were weighing competing concerns. For traders, this meant the Australian dollar could face headwinds if the RBA signaled a pause in its tightening cycle.

In the cryptocurrency markets, bitcoin gained 0.05% to $68,881.72, while ether was essentially flat at $1,999.11. The moves reflected the broader market mood: waiting, watching, and pricing in the most likely scenario while remaining alert to surprises.