Fed Dissent Fails to Boost US Dollar as BOJ Guidance Looms

The US dollar weakened despite three Federal Reserve officials dissenting in favor of a rate hike. The Fed held its interest rate target at 3.5%, 3.75%, and while some members called for a 25bp increase, the meeting was not deemed as hawkish as many had expected.

The US dollar's decline sent EUR/USD up 0.7%, GBP/USD up 0.5%, and USD/CHF down 0.7%. With the Federal Reserve now behind us, attention turns to the Bank of Japan, where guidance rather than rates is expected to drive the next move for USD/JPY and GBP/JPY.

The BOJ meeting tomorrow will likely focus on forward guidance, with policymakers widely expected to leave the policy rate unchanged. Markets see little chance of another hike this week, which could weigh on the Japanese yen and favor GBP/JPY and USD/JPY bulls.