Dollar Eases to 101.21, Yields Slip Across the Curve Ahead of FOMC

The US Dollar Index eased 0.15% to 101.21, tracking a broad pullback in Treasury yields into today's Fed decision. The 10-year yield fell 4.1bp to 4.600%, the 5-year fell 4.0bp to 4.357%, the 30-year fell 3.2bp to 5.093% and the 3-month fell 3.7bp to 3.760% - a broad-based, single-session dip rather than a large repricing. The Treasury sold $44 billion of 7-year notes at a high yield of 4.473%. Equities were mixed: the Dow rose 1.10% while the Nasdaq slipped 0.23%, consistent with a reported rotation out of technology and into industrials. The VIX eased 1.32% to 18.74, a calmer tone heading into the FOMC statement.

Today's Federal Funds Rate decision (calendar forecast and previous both 3.75%) anchors the session, with the FOMC statement and a press conference to follow. Desk notes put market-implied odds of a hawkish Fed surprise at roughly 33-38%, distinct from today's modest 3-4bp yield declines - a policy-odds repricing rather than a simple market move. On the data front, Richmond Fed manufacturing for July came in at 5 versus a 10 estimate, Conference Board Consumer Confidence printed 90.8 versus 92.3 expected, and the advance goods trade balance for June was -$101.5 billion versus -$100 billion forecast, a wider deficit. Case-Shiller home prices rose 1.6% y/y versus 1.3% expected, and wholesale inventories rose 0.3% versus 0.4% forecast.

EUR/USD traded at 1.1389 (+0.19%), holding near its recent lows as the pair awaits today's FOMC statement. GBP/USD was flat at 1.3292 (+0.03%), consolidating in a quiet range ahead of Thursday's Bank of England decision. USD/JPY held at 163.80 (+0.04%), pinned near its multi-decade highs, with the BoJ's two-day meeting concluding Thursday-Friday. USD/CAD eased to 1.4105 (-0.13%) as WTI crude fell 3.01% to $79.44, an oil-linked headwind for the loonie offset by broader dollar softness.

USD/JPY sits at 163.80, up a marginal 0.04% on the day and holding near its multi-decade highs. The pair has been underpinned by persistent yen weakness - the wide US-Japan rate gap and speculation the Fed could tighten further - while yen support from officials' repeated intervention warnings has not held. No new Ministry of Finance intervention was reported for this session. Markets are positioning for two catalysts in quick succession: today's FOMC statement and press conference, and the Bank of Japan's two-day policy meeting concluding Thursday-Friday, where a hold at 1% is widely expected. With the pair pinned just under its recent high and both central-bank events still ahead, today's FOMC outcome is the more immediate swing factor for the yen.

The marquee event is the Federal Funds Rate decision (04:00, forecast and previous both 3.75%), followed immediately by the FOMC Statement and, at 04:30, the FOMC Press Conference - all flagged high impact. Ahead of that: German Import Prices m/m (16:00, forecast -0.7%), Swiss UBS Economic Expectations (18:00), and a cluster of UK releases at 18:30 - M4 Money Supply m/m (forecast 0.2%), Mortgage Approvals (forecast 57K) and Net Lending to Individuals (forecast 5.5B) - plus a German 10-year bond auction (19:42) and US Crude Oil Inventories (00:30, forecast 0.7M). The Bank of Canada's Summary of Deliberations lands at 03:30. After the Fed, watch RBA Assist Governor Hunter's speech (08:40) and Australian Building Approvals and Import Prices (11:30).