US Dollar is in a very narrow range. The market is currently waiting for the interest rate announcements from three major central banks.

This week's market calendar includes the schedule for interest rate announcements from three banks simultaneously: the US Federal Reserve, the Bank of England (BoE), and the Bank of Japan (BoJ). The outcomes are difficult to predict, causing market participants to adopt a more cautious approach.

Various currency pairs were observed trading within a very narrow range during Monday's (September 18) Asian and European sessions. The US Dollar Index (DXY) dipped to the 105.20s but still hovered near the six-month high reached on Friday.

US Dollar Index

The strength of the US dollar is primarily based on the release of solid US economic data, outperforming the largest economies in Europe and Asia. Although the majority predict that the Fed will not raise interest rates in Wednesday's announcement, the Greenback is supported by market optimism.

"In the grand scheme of things, we're quite positive on the dollar," said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. "The U.S. economy is outperforming Europe and Asia, especially China."

"There's a strong consensus for a pause here," said RBC's Tan. "But there seems to be an expectation that we could see some hawkishness through the latest dot plot (of policymakers' rate expectations), given how resilient the U.S. economy has been."


Market expectations for the other two central banks are more complex. Most market participants anticipate the BoE will raise interest rates by 25 basis points on Thursday. However, the BoE will likely add a very dovish tone to the occasion, following in the footsteps of the ECB's interest rate announcement last week.

Most market participants believe the BoJ will maintain the target interest rate of -0.1%. However, BoJ Governor Kazuo Ueda suddenly raised the idea of a potential interest rate change at the end of the year a few days ago.

Ueda's statement has kept the USD/JPY rally below the 148.00 threshold, although some analysts have questioned its accuracy. Traders will seek confirmation in the statements accompanying the BoJ interest rate announcement on Friday. If the BoJ's statement or Ueda's comments turn dovish again, USD/JPY could jump into a higher range.