US Dollar struggles to rebound as markets assess Fed announcements
During the late American session on Wednesday, the US Dollar (USD) faced significant declines against its major counterparts as the Federal Reserve’s (Fed) statement and Chairman Jerome Powell’s remarks were less hawkish than anticipated. In the European economic agenda, final revisions to HCOB Manufacturing PMIs for Germany and the Eurozone are scheduled. Later in the day, market participants will closely monitor the weekly Initial Jobless Claims and Unit Labor Costs data for the first quarter from the US.
As expected, the Fed kept the policy rate unchanged at 5.25%-5.5%. In its policy statement, the Fed acknowledged a recent lack of progress toward the 2% inflation target. Regarding quantitative tightening, the Fed announced a slowing of the decline in the balance sheet by reducing the Treasury redemption cap to $25 billion per month from $60 billion starting June 1. During the press conference following the meeting, Chairman Powell chose not to give any indications regarding when a policy change might occur. However, he did imply that the next adjustment to interest rates was unlikely to involve an increase.stating that evidence of policy not being sufficiently restrictive was needed for a hike, which wasn’t currently observed.
Following volatile fluctuations during the press conference, the USD Index depreciated by over 0.6% on Wednesday. Early Thursday, the index traded within a narrow range above 105.50. At the same time, the benchmark 10-year US Treasury bond yield hovered just above 4.6% in the negative zone, while futures for US stock indices displayed modest increases.
USD Price Movement This Week
The table below displays the percentage change of the US Dollar (USD) against major currencies for the current week, with the USD showing weakness against the Japanese Yen.
Towards the end of the American session on Wednesday, USD/JPY experienced a rapid decline of nearly 400 pips in less than an hour. While no official confirmation has been provided, market participants perceive this movement as a result of another intervention. After dropping to 153.00, USD/JPY recovered during Asian trading hours and was last observed trading around 155.50.
EUR/USD demonstrated a significant rebound on Wednesday, reversing all losses from Tuesday. The pair maintained stability slightly above 1.0700 early Thursday in the European session.
GBP/USD predominantly traded below 1.2500 on Wednesday but closed above that level, supported by USD weakness. The pair remained in a consolidation phase around 1.2520 during the European session.
Gold benefited from USD selling pressure and declining T-bond yields on Wednesday, closing above $2,300. However, XAU/USD struggled to sustain its bullish momentum, trading slightly below $2,310 early Thursday.
