Forex Today: US Dollar extends Fed-inspired rally, eyes on BoE

The US Dollar (USD) gathered strength in the late American session on Wednesday and the USD Index reached a fresh multi-month high above 105.50 early Thursday as investors reacted to the Federal Reserve’s (Fed) hawkish rate pause. The Swiss National Bank (SNB) and the Bank of England (BoE) will announce policy decisions in the European session. Later in the day, the US economic docket will feature weekly Initial Jobless Claims and August Existing Home Sales data.

The Fed left its policy rate unchanged at 5.25%–5.5%, as expected following the September policy meeting. The revised Summary of Economic Projections (SEP), the so-called dot plot, however, confirmed that the US central bank was on track to raise the policy rate by another 25 basis points before the end of the year. Additionally, policymakers now see a total of 50 bps rate cuts next year, compared to the 100 bps rate cut projection seen in June’s dot plot. While speaking in the post-meeting press conference, “the majority of policymakers believe it is more likely than not that another rate hike will be appropriate,” FOMC Chairman Jerome Powell said.

US Dollar price this week

The table below shows the percentage change of the US Dollar (against the listed major currencies this week. The US Dollar was the strongest against the Pound Sterling.

The heat map shows the 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).

The USD/CHF gained traction and climbed above 0.9000 for the first time since early July on Thursday. The SNB is forecast to raise the policy rate by 25 basis points to 2%.

The BoE is forecast to lift its key rate to 5.5% from 5.25%. Following Wednesday’s soft inflation readings, several institutions noted that they were now expecting the BoE to hold the rate steady. There will not be a press conference and markets will pay close attention to the vote split and scrutinize the policy statement. The GBP/USD suffered large losses on Wednesday and continued to push lower on Thursday. At the time of press, the pair was trading at its weakest level since May, slightly above 1.2300.

UK Interest Rate Decision Preview: A BoE hike hangs in the balance as inflation cools.

After rising above 1.0700 during the European trading hours on Wednesday, the EUR/USD reversed its direction in the late American session and closed the day in negative territory. The pair extended its slide early Thursday and touched its lowest level since March, below 1.0620, before recovering to 1.0650.

The USD/JPY gathered bullish momentum and advanced to its strongest level since November, above 148.00. The Bank of Japan (BoJ) will announce monetary policy decisions in the Asian session on Friday.

The gold price came within touching distance of $1,950 ahead of the Fed event on Wednesday but erased all of its daily gains to close in negative territory as the benchmark 10-year US Treasury bond yield climbed above 4.4% on a hawkish dot plot. Early Thursday, the XAU/USD held steady at around $1,930. 

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