The US Dollar (USD) suffered significant losses against its major rivals in the US session last Wednesday as investors reacted to the Federal Reserve's (Fed) policy decisions and Fed Chair Jerome Powell's comments on the policy outlook. The dollar struggled to find demand early Thursday. Investors are awaiting Bank of England (BoE) policy announcements and global Purchasing Managers' Index (S&P) data for Germany, the Eurozone, the UK and the US. The US economic docket will also contain weekly initial jobless claims and existing home sales data for February.
The Fed's revised forecast summary showed that policymakers still expect an overall 75 basis point interest rate cut in 2024. In the press conference following the meeting, Chair Powell played down inflation concerns and placed additional weight on the US dollar's shoulders. Powell noted that inflation numbers were "very high" in January and February, but said they did not change the overall story of declining inflation, arguing that they were higher due to seasonal effects. The yield on 10-year US Treasury bonds fell to about 4.25% and the main indexes on Wall Street rose after the Fed event. In contrast, the US dollar index lost approximately 0.5% and broke a four-day winning streak. Early Thursday, US stock index futures were trading in positive territory and the US Dollar Index remained in the red below 103.50.
Jerome Powell talks about the policy outlook after leaving interest rates unchanged.
During Asian trading hours, data from Australia showed that the unemployment rate fell to 3.7% in February from 4.1% in January. This reading was better than market expectations of 4%. Employment change rose 116.5K in the period, beating analysts' estimates of 40K by a wide margin. The AUD/USD pair continued higher early Thursday after making strong gains on Wednesday and was last seen rising more than 0.5% on the day above 0.6620.
Australia's unemployment rate fell to 3.7% in February versus 4.0% expected.
The Australian dollar extends higher amid US dollar weakness, awaiting US PMI data.
The USD/JPY pair gathered bullish momentum and reached within striking distance of 152.00 in the US session on Wednesday. The pair made a deep correction at the beginning of the Asian session and fell below 150.50 before regaining its momentum. At the time of writing, the pair was trading marginally lower on the day near 151.00. Japanese Finance Minister Shunichi Suzuki said earlier in the day that they are closely monitoring the movement in foreign exchange markets with a sense of urgency. Meanwhile, Bank of Japan Governor Kazuo Ueda said they expect monetary policy to be maintained accommodative for the time being.
The Japanese yen is paring part of the strong intraday gains against the US dollar, and is not out of the woods yet.
The Bank of England is widely expected to leave interest rates unchanged at 5.25% after its policy meeting in March. The statement language that followed weak UK inflation data and split votes will be scrutinized by market participants for new clues about the timing of the policy pivot. The GBP/USD pair rose 0.5% on Wednesday and was last seen trading near 1.2800.
Bank of England Interest Rate Decision Preview: Dovish commentary likely as inflation falls more than expected.
USD/CHF closed slightly lower on Wednesday and fell towards 0.8850 early Thursday. The Swiss National Bank (SNB) will announce the interest rate decision at 08:30 GMT.
SNB Preview: Interest rate cut would further undermine outlook for the Swiss franc - Rabobank.a