The US Dollar (USD) surged to new heights on Wednesday, fueled by market optimism surrounding Donald Trump’s presidential victory. This rally saw the USD Index achieve its largest one-day gain of the year, up over 1.5%, as the dollar outperformed its major rivals. Wall Street also saw a significant boost, with the S&P 500 climbing 2.5% in response to the upbeat market sentiment.
However, as we enter Thursday, the USD rally shows signs of pause. The USD Index has dipped below the 105.00 level, with investors turning their attention to key events that could influence the currency’s trajectory. All eyes are on the upcoming Federal Reserve (Fed) meeting, with the market widely expecting a 25 basis point rate cut, bringing the policy rate to the 4.5%-4.75% range. Fed Chairman Jerome Powell’s press conference, scheduled for 19:30 GMT, will likely provide additional guidance on the central bank’s monetary policy outlook.
Alongside the Fed, the Bank of England (BoE) will also be making its interest rate announcement, with expectations pointing toward a 25 basis point cut to 4.75%. The BoE’s policy statement, delivered by Governor Andrew Bailey at 12:30 GMT, will be another crucial event for the markets, particularly for GBP/USD, which saw a sharp decline of over 1% on Wednesday. The pair, however, has shown signs of recovery on Thursday, trading comfortably above the 1.2900 mark.
Elsewhere in the FX market, the Euro struggled as EUR/USD dropped nearly 2% on Wednesday, falling to its weakest point in over four months below 1.0700. The pair is attempting to stabilize, holding steady near 1.0750 ahead of Eurostat’s Retail Sales data for September, which could offer further insights into the Eurozone’s economic performance.
Also read : GBP/USD Rebounds From 1.2835 Multi-Month Low, Eyes 1.2900 As BoE Rate Decision And Fed Meeting Awaited
The Japanese Yen (JPY) also saw some volatility, with USD/JPY climbing to its highest level since late July, surpassing 154.40. However, the pair corrected lower on Thursday, trading closer to the 154.00 level. This movement follows a period of significant strength for the US Dollar, which has been buoyed by rising US Treasury yields and overall market risk appetite.
Commodities, particularly gold, struggled under the pressure of surging US yields and the strengthening dollar. Gold prices saw a sharp 3% decline on Wednesday, closing below $2,660. Despite attempts at a rebound on Thursday, XAU/USD remains under pressure, trading marginally lower on the day.
