Forex Today: Dollar stabilizes after Powell's curve-ball, eyes on BoE

Eren Sengezer FXStreet

Here is what you need to know on Thursday, November 3:

Following Wednesday's highly volatile market action during the Fed event, the dollar looks to stabilize early Thursday with the US Dollar Index moving sideways in a tight range above 112.00. US stock index futures trade modestly higher on the day after having suffered heavy losses mid-week and the 10-year US Treasury bond yield holds above 4%. The Bank of England (BoE) will unveil the monetary policy decisions and Governor Andrew Bailey will comment on the outlook in a press conference from 1230 GMT. The US economic docket will feature September Goods Trade Balance data, the weekly Initial Jobless Claims figures and the ISM's Services PMI later in the day.

Bank of England Preview: Why Super-Thursday is set to sink sterling, even in case of a big hike.

As expected, the Fed decided to raise its policy rate by 75 basis points to the range of 3.75-4% following its November policy meeting. In the policy statement, the Fed noted that policymakers will take cumulative tightening, policy lags and economic and financial developments into account in determining the pace of rate hikes. This comment triggered a strong dollar selloff but FOMC Chairman Jerome Powell's remarks during the press conference allowed the currency to regather its strength.

Powell reiterated that it was very premature to even be thinking about pausing rate hikes and said that he was expecting December's dot plot to show a higher terminal rate than September's projection. The chairman explained that slower rate hikes could come as soon as December or February but reassured markets that they will continue to tighten the policy to not allow inflation to get entrenched.

Fed Quick Analysis: Powell pivot? Not so fast, why this looks like a dollar buying opportunity.

EUR/USD reversed its direction after having advanced toward parity in the late American session on Wednesday and ended up posting its lowest daily close in two weeks. The pair was last seen trading in a narrow channel at around 0.9800.

The BoE is forecast to hike its policy rate by 75 bps to 3%. British Prime Minister Rishi Sunak's decision to postpone the fiscal policy announcement, however, puts the bank in a tough spot. Bailey will surely be asked about how Sunak's budget could impact the policy moving forward and his comments could impact the British pound's performance against its rivals in a significant way. GBP/USD lost more than 150 pips on Wednesday and was trading in negative territory at around mid-1.1300s at the time of press.

BoE Interest Rate Decision Preview: A close call between 50 bps and 75 bps, GBP/USD set to suffer.

USD/JPY staged a rebound during Powell's presser late Wednesday and ended up closing the day flat near 148.00 The pair stays relatively quiet early Thursday as it awaits the next catalyst.

Pressured by the decisive rebound witnessed in the US Treasury bond yields during Powell's press conference, gold registered large losses on Wednesday. XAU/USD stays under bearish pressure and trades at its lowest level since October 20 at around $1,630.

Bitcoin lost more than 1% on Wednesday but managed to stay afloat above $20,000. Ethereum came within a touching distance of $1,500 but found support near that level.

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.

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