The US dollar drop intensified Wednesday with Powell reiterating a dovish stance. The euro continued its run and was the top performer while USD lagged, but today, GBP is the only gainer vs USD as the greenback gets some month-end relief. The first look at second quarter US GDP on Thursday will show the largest contraction on record.

The largest kneejerk reaction to the FOMC decision was on Powell warning that the pace of improvement in high-frequency indicators had slowed. That sparked a momentary drop in risk trades and a recovery in the US dollar.

The other message was a strong reiteration of what we've heard before: That the Fed is prepared to do whatever is in its power to stimulate the economy during the pandemic. What was missing was anything specific about what that might entail.

Looking ahead, Fed watchers will await how the central bank uses forward guidance using inflation or unemployment.

In terms of overall price action, the trend was towards more US dollar weakness. USD/CHF hit a five year low after the eighth straight day of declines. The euro has made another one-year high as it touched above 1.18.

The main risk for the US dollar in the day ahead is the Q2 GDP report. The consensus is for an astounding -34.8% with estimates ranging from -25.0% to -40.0%. Risks are a touch to the positive side because the advance trade balance was surprisingly strong on Wednesday.

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