Forex Today: Dollar retreats despite hawkish Fed, eyes on BOE

Eren Sengezer FXStreet

Here is what you need to know on Thursday, March 17:

Risk flows dominated the financial markets in the second half of the day on Wednesday despite the US Federal Reserve's hawkish policy outlook. The US Dollar Index, which fell 0.6% on Wednesday, stays relatively quiet early Thursday as investors await EU inflation report, Bank of England's (BOE) rate decision and mid-tier data releases from the US. Meanwhile, the market mood remains mixed amid contradicting headlines on the Russia-Ukraine conflict.

The Fed increased its policy rate by 25 basis points following its two-day meeting in a widely expected decision. The Summary of Economic Projections, the so-called dot-plot, revealed that policymakers were expecting six more hikes this year with the policy rate hitting 1.9% by the end of 2022 before rising to 2.8% by the end-2023. Although the initial market reaction caused US T-bond yields to push higher and helped the dollar gather strength against its rivals, FOMC Chairman Jerome Powell's remarks soothed markets.

Powell said they were still expecting inflation to come down in the second half of the year despite heightened uncertainty and reassured markets that they will tackle inflation without hurting the economic activity. "We are strongly committed to not allowing high inflation to become entrenched," Powell noted. "The good news is that the economy and labor market is quite strong, can handle interest rate increases."

Federal Reserve hikes 0.25%, cautious on balance sheet and economic growth.

The Financial Times reported late Wednesday that Ukraine and Russia had made significant progress towards a potential peace plan. This headline revived optimism for a ceasefire but the Ukrainian side has reportedly rejected the proposed neutrality. Moreover, several reporters noted that Ukraine saw the positive shift in Russia's tone as an attempt to ease the sanctions' pressure.

EUR/USD closed the second straight day in positive territory on Wednesday but struggled to clear 1.1050. The pair trades in a relatively tight range near 1.1030 early Thursday.

GBP/USD extended its recovery after breaking above 1.3100 and clings to small daily gains above 1.3150 in the European morning. The BOE is expected to hike its policy rate by 25 basis points later in the session.

BOE Interest Rate Decision Preview: A hat-trick and a difficult balancing act.

Fueled by surging US Treasury bond yields, USD/JPY reached its highest level in six years above 119.00 on Wednesday. The pair retreated during the Asian trading hours but seems to have settled above 118.50.

Gold dropped below $1,900 for the first time in March with the immediate reaction to the Fed's policy statement on Wednesday. XAU/USD, however, managed to reverse its direction during Powell's presser and continued to push higher during the Asian session. The pair was last seen clinging to modest daily gains above $1,930.

Bitcoin capitalized on the risk-positive market environment and reclaimed $40,000 late Wednesday. BTC/USD stays in a consolidation phase near $41,000 early Thursday. Ethereum gained nearly 6% on Wednesday and was last seen fluctuating in a tight range above $2,700.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

GBP/USD slides below 1.3250 after failing to break through 23.6% Fibo

The GBP/USD pair meets with a fresh supply during the Asian session on Wednesday and moves away from a nearly two-week high around the 1.3275 region, touched the previous day. Spot prices currently trade around the 1.3235 zone, down 0.20% for the day, as traders look to speeches from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh for a fresh impetus.

EUR/USD declines to near 1.1400 as German inflation undercuts ECB hike bets

The EUR/USD pair loses momentum to near 1.1410 during the early Asian trading hours on Wednesday, pressured by receding bets for aggressive tightening by the European Central Bank (ECB). Traders will take more cues from the preliminary reading of the Harmonized Index of Consumer Prices from the Eurozone and US Manufacturing Purchasing Managers Index report, which are due later in the day.

Gold sticks to bearish bias below $4,000 amid Fed hike bets and Iran risks

Gold attracts fresh sellers following the previous day's good two-way price swings, and weakens further below the $4,000 psychological mark through the Asian session. This marks the third straight day of a slide and keeps the precious metal closer to its lowest level since November 2025. Moreover, a bullish US Dollar suggests that the path of least resistance for the bullion is to the downside.

Cardano consolidation near support as bearish momentum eases

Cardano (ADA) trades around $0.146 on Wednesday, stabilizing after a sharp correction as selling pressure eases. Weakening derivatives metrics indicate traders remain cautious, while fading bearish momentum indicators suggest a potential recovery for ADA. Cardano’s derivatives metrics support a negative outlook.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The European Central Bank Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Federal Reserve, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.