Forex Today: Dollar hit by a not-that-aggressive Fed

Valeria Bednarik FXStreet

What you need to take care of on Thursday, May 26:

The greenback aimed to recover ground but pared its advance during US trading hours, ahead of the FOMC Meeting Minutes. The document showed that all members supported plans to reduce the balance sheet, while some added that, after the runoff was well underway, it would be appropriate to consider sales of mortgage-backed securities.

Also, all participants at the central bank’s May policy meeting agreed that a half-percentage-point interest rate hike was appropriate, while most judged such a hike would be appropriate at the next couple of meetings. Chances of a 0.50% rate increase in September have decreased sharply with the news, which in turn gave a late boost to Wall Street. Indexes posted substantial gains ahead of the close, after spending the day around their opening levels.

US government bond yields remained stable, ending the day little changed on Thursday.

Mounting tensions between the US and China after US President Joe Biden said that his country would militarily defend Taiwan in the event of a Chinese invasion weighed on the market’s mood, alongside slowing economic growth and lingering inflation.

The European Central Bank published the Financial Stability Review, which took its toll on the shared currency, as policymakers noted that "an abrupt increase in real interest rates could induce house price corrections” while adding that "further corrections in financial markets could be triggered by escalation of war, even weaker global growth or if the monetary policy needs to adjust faster than expected."

Data kept disappointing, as Durable Goods Orders were up a modest 0.4% in April, below the 0.6% expected.

The EUR/USD pair trades around 1.0680, while GBP/USD reached fresh daily highs at the end of the day, now trading around 1.2570. Commodity-linked currencies advanced during the American session against the greenback, with USD/CAD down to 1.2810 and AUD/USD pressuring the 0.7100 figure.

Gold recovered from $1,841.84 a troy ounce, a fresh weekly low, to settle around $1,855. Crude oil prices remained stable, as WTI trades at $110.60 a barrel.

Ethereum whale scoops up 86.7 billion Shiba Inu while large wallet investors shed SHIB

Like this article? Help us with some feedback by answering this survey:

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

AUD/USD eyes 100-SMA hurdle near 0.7035 as hawkish RBA counters firmer USD

AUD/USD regains positive traction on Tuesday and climbs to 0.7030 during the Asian session, reversing the previous day's corrective slide from a one-month high as hawkish RBA rate expectations continue to support the Aussie. Spot prices, however, remain below the 100-day SMA pivotal resistance amid a firmer US Dollar as traders brace for Australia’s September CPI report on Wednesday ahead of the Fed rate decision.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold advances modestly past $4,000

Gold looks to consolidate Tuesday’s humble gains just above the key $4,000 mark per troy ounce. Indeed, the precious metal adds to Monday’s bounce despite the better tone in the US Dollar, mixed US Treasury yields and steady caution ahead of the FOMC event on Wednesday.

Crypto Today: Bitcoin, Ethereum and XRP on edge as sell-side pressure intensifies

Cryptocurrency prices are broadly correcting on Tuesday, led by Bitcoin (BTC) edging lower below the pivotal $80,000 level. Ethereum (ETH) mirrors Bitcoin’s neutral-to-bearish outlook, while Ripple (XRP) hovers around $1.30.

Experts agree: Fed policy outlook and geopolitical tensions keep US Dollar bid

The US Dollar Index rallies 0.6% in three days and hits fresh two-week highs above 102.00. Investors return to the US Dollar as markets brace for a hawkish hold by the Fed on Wednesday. Waning hopes of any immediate US-Iran peace deal have provided additional support to the safe-haven USD.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.