Forex Today: US Dollar continues to suffer losses in Fed aftermath, BoE and ECB next

The US Dollar continues to weaken against its rivals early Thursday after having suffered large losses following the Federal Reserve (Fed) event late Wednesday. The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) will be announcing monetary policy decisions on Thursday. Later in the day, the US economic docket will feature the weekly Initial Jobless Claims and Retail Sales data for November. ECB President Christine Lagarde will also hold a press conference to speak on the policy outlook and to respond to questions.

The Fed decided to leave the policy rate unchanged at 5.25%-5.5% as expected following the last policy meeting of the year. The revised Summary of Economic Projections revealed that officials’ median view of the policy rate at the end of 2024 stood at 4.6% implying a total rate reduction of 75 basis points next year. In the post-meeting press conference, Chairman Jerome Powell acknowledged that policymakers were thinking and talking about when it will be appropriate to start cutting the interest rate. “We are very focused on not making the mistake of keeping rates too high too long,” Powell added.

These dovish comments combined with the dovish dot plot triggered a sharp decline in US yields. The benchmark 10-year US Treasury bond lost more than 4% on Wednesday and continued to stretch lower early Thursday, putting additional weight on the USD’s shoulders. At the time of press, the 10-year US yield was at its lowest level since early August below 4% and the USD Index, which fell nearly 1% on Wednesday, was down 0.3% at 102.60.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.

USD -1.27%-0.71%-0.82%-2.08%-2.37%-1.83%-1.25%
EUR1.25% 0.54%0.44%-0.81%-1.08%-0.56%0.03%
GBP0.72%-0.54% -0.11%-1.34%-1.62%-1.10%-0.51%
CAD0.81%-0.44%0.10% -1.25%-1.53%-1.00%-0.43%
AUD2.04%0.80%1.34%1.23% -0.28%0.25%0.81%
JPY2.29%1.08%1.52%1.49%0.29% 0.55%1.09%
NZD1.79%0.54%1.09%0.98%-0.26%-0.54% 0.55%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

During the Asian trading hours, the data from Australia showed that Employment Change was +61.5K in November, much higher than the market expectation of 11K. Additionally, the Reserve Bank of Australia (RBA) reported that the Consumer Inflation Expectations declined to 4.5% in December from 4.9%. Following Wednesday’s upsurge, AUD/USD preserved its bullish momentum and was last seen trading at its highest level since late July above 0.6700.

EUR/USD broke out of its tight weekly trading range late Wednesday and climbed above 1.0900 early Thursday. The ECB is forecast to leave key rates unchanged and updated economic projections will be watched closely by market participants.

GBP/USD gained more than 50 pips on Wednesday and stabilized at around 1.2650 early Thursday. The BoE is set to stand pat on policy and vote split will be key since there won’t be a press conference.

Gold capitalized on falling US yields and surged above $2,000 late Wednesday. In the European morning XAU/USD trades modestly higher on the day at around $2,030.

USD/JPY declined sharply and broke below 142.00. At the time of press, the pair was down nearly another 1% on the day at around 141.50.

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