The US Dollar (USD) is gaining strength against other currencies on Thursday, supported by the Federal Reserve’s hawkish guidance. The European Central Bank (ECB) is expected to announce its monetary policy decisions later in the day. Economic data releases from the US will include May Retail Sales, the Philadelphia Fed Manufacturing Survey for June, and the weekly Initial Jobless Claims data.
Following the June policy meeting, the Fed kept its policy rate unchanged within the 5-5.25% range, stating that maintaining the target range will provide time to evaluate additional information and its implications for monetary policy. Notably, the Summary of Economic Projections revealed an upward revision of the terminal rate projection for the end of 2023 to 5.6% from 5.1% in March, suggesting two more rate hikes in 2023. Additionally, the end-2024 rate forecast increased to 4.6% from 4.3%.
Although Fed Chairman Jerome Powell did not commit to a rate increase in July, the hawkish dot plot boosted the USD, pushing the US Dollar Index above 103.00.
The ECB is widely expected to raise key rates by 25 basis points, and ECB President Christine Lagarde will provide insights on the policy outlook and address questions from the press in a news conference. The EUR/USD pair declined towards 1.0800 after reaching its highest level in nearly a month above 1.0860 on Wednesday.
GBP/USD saw a slight decline in the late American session but recorded its highest daily close in over a year at 1.2670. The pair is trading in negative territory below 1.2650 amid renewed USD strength.
Following the Fed meeting, USD/JPY gained bullish momentum and reached its highest level since November, surpassing 141.00. The Bank of Japan will announce its monetary policy decisions during Asian trading hours on Friday.
Bearish Market Conditions
In Australia, the Unemployment Rate decreased to 3.6% in May from 3.7% in April, while Employment Change exceeded market expectations at +75,900 compared to an anticipated increase of 15,000. The positive employment data helped the Australian Dollar (AUD) remain resilient against the USD, with AUD/USD trading slightly higher above 0.6800.
Gold prices faced bearish pressure and dropped to their lowest level since mid-March at $1,930 before experiencing a modest recovery. The 10-year US Treasury bond yield rose above 3.8%, weighing heavily on XAU/USD.
Bitcoin turned downwards after the Fed event on Wednesday, with BTC/USD reaching a fresh two-month low below $25,000. Ethereum also experienced a 5% decline on Wednesday and extended its slide on Thursday. ETH/USD was down nearly 1% at $1,640 at the time of writing.
