The US Dollar (USD) is mixed but tracking a little lower overall as the Dollar Index (DXY) continues to drift back from the 99 zone where the index appears to have peaked after its latest run higher, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets await FOMC Wednesday

The Japanese Yen (JPY) is the top-performer on the session among the majors and now looks to have set a short-term peak in the low 153 zone. President Trump’s visit to Japan saw the two countries reaffirm their relationship and agree to co-operate on rare earths. The president welcomed plans to boost defence spending. The Japanese government said it will continue to monitor the impact of yen weakness on the economy, helping lift the JPY. The JPY is still lagging the recent narrowing in US/Japan rate spreads by a significant margin."

"A sustained pickup in the JPY in the short run could see spot retest recent lows just under 150–which could trigger a deeper JPY rebound. Regional FX has been pulled higher on the JPY’s coattails. While the CNY is lagging some of its Asian peers, the USD has eased below the CNY7.10 level to its lowest in a year which may represent a broader headwind for the USD. With few notable developments elsewhere, markets have little to do but idle ahead of Wednesday’s Fed policy decision. Global stocks are mixed to slightly weaker while major bond markets are mostly firmer. Gold continues to soften, down nearly 2% on the session and nearing $3900."

"There is a little US data to focus on but second-tier housing data at 9ET, followed by the Richmond Fed Manufacturing Index and consumer confidence data at 10ET are unlikely to move the markets significantly. Regional manufacturing survey data for October so far have been mixed but may suggest some further slowing in the national ISM Manufacturing index (reported at 49.1 in September) when the latest data are released on November 3. Australia releases inflation data this evening at 20.30ET. RBNZ Governor Hawkesby speaks on central bank independence. The RBNZ was a pioneer in the move to central bank independence when it adopted inflation targeting around 1990 so it might have something to say on the matter."