Forex Today: With the ECB and BoE decisions approaching, the USD holds onto its Fed-driven strength
Market Overview for Thursday, March 19
The US Dollar (USD) is currently trading in a narrow range after showing strong gains against other major currencies during Wednesday’s US session. Today, investors are focused on upcoming monetary policy announcements from the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB). Additionally, the US will release its weekly Initial Jobless Claims and January New Home Sales figures.
Federal Reserve Update
As expected, the Federal Reserve kept its policy rate unchanged at 3.5%-3.75% following its March meeting. The latest Summary of Economic Projections (SEP) indicates that officials foresee a 25 basis-point rate reduction in both 2026 and 2027, consistent with the December outlook. Notably, seven members anticipate no rate cuts this year, while one expects a rate increase in 2025. The Fed now projects Personal Consumption Expenditures (PCE) inflation to reach 2.7% by the end of 2026, up from 2.4% in December, with core PCE inflation also at 2.7%.
During the press conference, Fed Chair Jerome Powell stated that rising energy costs are likely to push inflation higher in the short term, and emphasized that rate reductions will not proceed if inflation does not continue to moderate.
US Dollar Index Performance
After declining for two consecutive days, the USD Index rebounded on Wednesday, climbing nearly 0.7%. On Thursday morning, the index remains stable, trading just above the 100.00 mark.
Bank of Japan Decision
The Bank of Japan (BoJ) announced on Thursday that it would maintain its short-term interest rate at 0.75% after its two-day policy meeting. One policymaker advocated for a 25 basis-point increase, citing that price stability has largely been achieved and that inflation risks in Japan are tilted upward due to external factors. BoJ Governor Kazuo Ueda commented that inflation is expected to face upward pressure from higher oil prices, and noted that real interest rates remain very low. After reaching its highest level since July 2024 near 160.00 late Wednesday, USD/JPY has pulled back and is currently trading around 159.50.
Australian Labor Market Data
Australian statistics released earlier today revealed that Employment Change for February increased by 48,900, surpassing the forecast of 20,300. However, the Unemployment Rate edged up to 4.3% from 4.1%. Following a decline of over 1% on Wednesday, the AUD/USD has staged a modest recovery, trading just below 0.7050 in early European trading.
UK Employment and BoE Outlook
According to the UK’s Office for National Statistics, the ILO Unemployment Rate held steady at 5.2% for the three months ending in January. During this period, annual wage growth excluding bonuses slowed to 3.8% from 4.1%. The GBP/USD pair showed little reaction to the employment report and continues to move sideways below 1.3300. The BoE is widely expected to keep its bank rate unchanged at 3.75%.
Euro and ECB Expectations
The EUR/USD pair is holding above 1.1450 after dropping nearly 0.8% on Wednesday. Market participants are closely watching for remarks from ECB President Christine Lagarde, as the central bank is anticipated to leave interest rates unchanged.
Commodities Update
- Gold: The price of gold fell below $5,000, losing almost 4% on Wednesday due to renewed strength in the USD. XAU/USD continues to decline in Thursday’s European session, reaching its lowest point since early February, now trading below $4,800.
- Crude Oil: After a sharp rally on Wednesday, crude oil prices are correcting lower. West Texas Intermediate (WTI) crude, which surged nearly 4% yesterday, is now trading around $95.50 per barrel, down approximately 3.5% for the day.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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