[MARKET ANALYSIS] USD trades flat after recent weakening and as central bank rate decisions loom

DXY: Flat

• Lacks direction after weakening yesterday as risk sentiment was boosted by the US and Iran reaching a framework peace agreement, which is expected to be formally signed in Switzerland on Friday. The full details have yet to be released, although reports suggested the US would lift its naval blockade and Iran would reopen the Strait of Hormuz, while there were discrepancies, such as surrounding the release of funds, with US President Trump refuting reports of a potential USD 300bln reconstruction fund for Iran. Nonetheless, the focus now turns to the incoming slew of rate decisions, including from the FOMC on Wednesday.

EUR/USD: Flat

• Takes a breather after it recently benefited from a softer dollar, but ultimately failed to sustain the 1.1600 status despite several ECB comments, which were mostly hawkish-leaning.

GBP/USD: Flat

• Faded this week's initial gains and returned to flat territory amid quiet newsflow, while the calendar remains light for the UK, but will pick up from Wednesday with the release of CPI data, followed by the BoE and the key Makerfield by-election, which are both scheduled on Thursday.

USD/JPY: -0.1%

• Continued to pull back from Monday's peak, but retains the 160.00 handle as participants brace for the BoJ policy decision in which the central bank is widely expected to lift rates to its highest in more than three decades, but may also discuss slowing the future tapering of its bond purchases.

Antipodeans: AUD/USD -0.2% / NZD/USD -0.1%

• Retreated as the risk sentiment in Asia waned and following mixed activity data from China, which showed a contraction in Retail Sales, while participants also await the RBA rate decision, in which the central bank is expected to stand pat after having delivered three consecutive rate hikes so far this year.