Here is what you need to know on Thursday, September 22:
The US Dollar Index surged to its highest level since July 2002 above 111.70 following the US Federal Reserve's decision to hike its policy rate by 75 basis points (bps) late Wednesday. The dollar preserves its strength early Tuesday as market participants get ready for the Swiss National Bank (SNB) and the Bank of England's (BoE) policy announcements. Later in the day, the European Commission will release the September Consumer Confidence data and the US economic docket will feature the weekly Initial Jobless Claims.
Although the Fed's 75 bps hike was in line with the market expectation, the Summary of Economic Projections showed a hawkish tilt in the policy outlook. The dot plot revealed that officials' median view of the fed fund rate at the end of 2023 rose to 4.6% from 3.8% in June's dot plot. Furthermore, policymakers see the policy rate at 3.9% by the end of 2024, compared to 3.4% previously. During the press conference, FOMC Chairman Jerome Powell acknowledged that there was no "painless way" to bring inflation down but noted that it was difficult to know whether the US economy would tip into recession.
Fed Quick Analysis: Powell projects pain, higher rates for longer set to keep the dollar bid.
Wall Street's three main indexes lost more than 1.5% on Wednesday and the benchmark 10-year US Treasury bond yield managed to hold above 3.5%. Early Thursday, US stock index futures are down between 0.25% and 0.65%.
Earlier in the day, the Bank of Japan (BoJ) announced that it left its policy settings unchanged, leaving the interest rate steady at -0.1% and maintaining the 10-year JGB yield target at 0.00%. USD/JPY gathered bullish momentum and climbed to its highest level since July 1998 at 145.40 before correcting toward 145.00.
Breaking: USD/JPY jumps as BOJ keeps policy settings steady.
Despite the broad-based dollar strength, USD/CHF stays relatively quiet at around 0.9650. The SNB is expected to raise its policy rate by 75 bps to 0.5% from -0.25%.
SNB Preview: Firing up the franc? Currency war, 3 other reasons, imply massive 100 bps hike.
GBP/USD trades at its weakest level since 1985 below 1.1250 early Thursday. Analysts see the BoE raising its policy rate by 50 bps to 2.25% but the positioning of futures markets suggests that there is a strong chance of a 75 bps hike. Since there won't be a press conference, the vote split could impact the British pound's valuation against its major rivals.
BOE Interest Rate Decision Preview: GBP/USD braces for volatility storm, eyeing a 75 bps hike.
EUR/USD dropped to a fresh two-decade low early Thursday and came within a touching distance of 0.9800. European Central Bank (ECB) executive board member Isabel Schnabel reiterated on Thursday that they must continue to raise interest rates, providing support to the shared currency for the time being.
Although gold managed to close in positive territory on Wednesday, it failed to preserve its bullish momentum and turned south early Thursday. Pressured by rising US yields, XAU/USD was last seen trading at around $1,660.
Bitcoin fell toward $18,000 late Wednesday but recovered to the $19,000 area early Thursday. Ethereum lost nearly 6% and touched its lowest level since mid-July near $1,200 on Wednesday. At the time of press, ETH/USD was up 2% on the day at $1,270.
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