Dollar struggles to find demand in Fed aftermath

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The US Dollar suffered large losses against its major rivals in the American session on Wednesday as investors reacted to the Federal Reserve’s policy decisions and Chairman Jerome Powell’s remarks on the policy outlook after leaving interest rate unchanged.

USD struggled to find demand early Thursday as investors await the Bank of England’s policy announcements and S&P Global PMI data for Germany, the Euro area, the UK and the US.

The US economic docket will also feature the weekly Initial Jobless Claims and Existing Home Sales data for February.

The Fed’s revised Summary of Projections showed that policymakers still expect a total of 75 basis points reduction in the policy rate in 2024.

In the post-meeting press conference, Chairman Powell downplayed inflation concerns and put additional weight on the USD’s shoulders. He noted that inflation numbers were “quite high” in January and February, but said that they have not changed the overall story on disinflation, arguing that they were higher due to seasonal effects.

The benchmark 10-year US Treasury bond yield declined toward 4.25% and Wall Street’s main indexes rallied following the Fed event. In turn, the USD Index lost nearly 0.5% and snapped a four-day winning streak.

Early Thursday, US stock index futures trade in positive territory and the USD Index stays in the red below 103.50.

Australia jobless down

In Asian trading, data from Australia showed that unemployment declined to 3.7% in February from 4.1% in January. This came in better than the market expectation of 4%.

Employment change was up 116,500 in this period, surpassing analysts’ estimate of 40,000 by a wide margin.

The AUDUSD pair extended its rally early Thursday after posting strong gains on Wednesday and it was last seen rising more than 0.5% on the day above 0.6620.

The Japanese Yen trimmed a part of strong intraday gains against the USD, but is not out of the woods yet.

USDJPY gathered bullish momentum and came within a touching distance of 152.00 in U.S. trading on Wednesday. The pair staged a deep correction in the early Asian session and declined below 150.50 before regaining its traction.

Japanese Finance Minister Shunichi Suzuki said earlier in the day that they are closely watching the action in foreign exchange markets with a sense of urgency. In the meantime, Bank of Japan Governor Kazuo Ueda said that they expect to maintain the accommodative monetary policy for the time being.

The Bank of England is widely expected to leave the policy rate unchanged at 5.25% after the March policy meeting. The statement language following the soft UK inflation data and the vote split will be scrutinised by market participants for fresh clues on the timing of the policy pivot.

GBPUSD rose 0.5% on Wednesday and was last seen trading near 1.2800.

Gold gathered bullish momentum and climbed to a new all-time high of $2,222 in the Asian session on Thursday, before retreating toward $2,200.

Finally, EURUSD rallied above 1.0900 late Wednesday and continued to push higher early Thursday. The pair was last seen trading slightly below 1.0950.

(Source: OANDA)