Last week, the dollar traded mostly higher. The Federal Open Market Committee (FOMC) minutes and recent commentary from Fed officials suggest that the market may be overestimating the likelihood of two rate cuts this year. On a background the recent resilience of the labor market and persistent inflation, market expectations for rate cuts have shifted. The futures market currently prices in just over a 37% chance of a second cut, down from 76% on May 17, indicating room for further adjustment.
The dollar climbed above JPY157 for the first time since May 1, but caution is expected as it approaches JPY158.
The euro reached a peak on May 16, just shy of $1.09, before falling to nearly $1.0810 last week.
Meanwhile, sterling hit a two-month high near $1.2760 following a softer CPI report, which led the market to push the expected first rate cut to November. Despite softer May flash PMI data and a significant decline in April retail sales (-0.23%), sterling rebounded close to the week's high ahead of the weekend. Prime Minister Sunak announced national elections for July 4, with the Tories anticipated to lose decisively after nearly 14 years in power.
The US dollar tested support near CAD1.36 last week, recovering to nearly CAD1.3750 before selling off to slightly below CAD1.3660 before the weekend.

Traders should exercise caution today due to the U.S. day off, which will result in low liquidity and an increased risk of unpredictable price movements.