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Jerome Powell had a lot to say during the press conference after yesterday's FOMC decision to raise the Federal Funds rate by 25 basis points. He stressed that the inflation risk persisted despite favorable disinflation observed in most sectors.
The European Central Bank (ECB) and Bank of England (BoE) will meet later today and both banks are expected to raise their interest rates by 50bps.
The dollar slide against the Japanese yen, dropping to as low as 128.07, its lowest in two weeks.
Prior to the FOMC event, USD/JPY rose, approaching the falling resistance of the trendline, and then fell. USD/JPY rebounded after finding an intermediate cushion around 128.20 in the Asian session. Considering the risk sentiment in the market, the downtrend is intact. Now the USD/JPY pair is holding above 128.35.
As the Bank of Japan keeps the 10-year Treasury yield at 0.5%, the falling US equivalent continues to narrow the interest rate differential, indicating continued declines in the USD/JPY pair.
EUR/USD hit a 10-month high at 1.1033 today.
EUR/USD pulled back slightly after reaching its highest level since early April at 1.1033 during the Asian trading hours on Thursday. The pair's technical outlook points to overbought conditions in the short term, but market participants may bet on further strengthening of the euro if the European Central Bank (ECB) repeats its hawkish message.
The ECB will raise the main interest rate by 50 bp. The decision itself is largely priced in and is unlikely to receive a significant backlash. Some ECB policymakers have advocated a further 50 basis point hike at the next meeting, and the euro could gain strength if a policy statement or ECB President Christine Lagarde confirms such an action.
Additionally, EUR/USD could maintain its bullish momentum if the ECB refrains from being optimistic about the inflation outlook.
The EUR/USD pair fell below the 1.1000 level but slightly and is trading at 1.0991.
GBP/USD drops towards 1.2300 during European trading hours. Sterling remains under slight downward pressure as investors wait for the BOE decision on interest rates.
Despite strong selling pressure around the US dollar late Wednesday, GBP/USD's gains remain contained, especially against EUR/USD.
On Thursday, the BOE is expected to raise its key rate by 50bps to 4% from 3.5%, but the GBP/USD pair could extend the decline nonetheless.
At this point, a BOE rate hike of 25 basis points would be a dovish surprise and weigh heavily on sterling.
The Australian dollar appreciated past $0.71 to its strongest levels in nearly eight months, as the US Federal Reserve reduced the size of its rate hike and said it has made progress in the fight against inflation.
The aussie also remains supported by expectations that the Reserve Bank of Australia will press on with its fight against inflation and by China’s rapid reopening from Covid curbs.
From a technical point of view, the daily chart of AUD/USD suggests that the pair will continue to rise.
Source: investing.com, finance.yahoo.com
