Forex Today: Fed sent the dollar further lower

FXStreet Team FXStreet

What you need to know on Wednesday, May 11th:

The dollar ended the day lower against most major rivals, weaker against safe-haven rivals after a dovish US Federal Reserve. Equities initially rallied with the news but turned lower as Powell offered a speech, ending the day in the red.

The central bank left the benchmark interest rate unchanged at 0%-0.25% as widely expected. Among other things, the statement showed that policymakers will continue to buy Treasuries and mortgage-backed securities “at least at the current pace” over the coming months. The dot-plot showed that rates will remain at current levels until 2022. Powell reiterated that the central bank is ready to use its full range of tools to support the US economy. The GDP is seen falling by 6.5% this year, yet rising 5.0% in the next.

The EUR/USD pair hit 1.1422 and settled around 1.1390, while GBP/USD reached 1.2812 to finish at around 1.2750.

According to a leaked document, the European Parliament could veto any trade deal between the UK and the EU that fails to ensure fair competition and strong standards on the environment and workers’ rights.

Commodity-linked currencies rallied to fresh multi-week highs against the greenback, but trimmed most of their intraday gains ahead of the close, dragged lower by equities. The USD/JPY pair settled a few pips above 107.00.

Gold prices soared, with spot ending the day at around $1,736.60 a troy ounce. Crude oil prices advanced intraday but pulled back from highs alongside Wall Street.

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EUR/USD holds losses while keeping its range near 1.1850 in European trading on Friday. A broadly cautious market environment paired with a steady US Dollar undermines the pair ahead of the critical US CPI data. Meanwhile, the Eurozone Q4 GDP second estimate has little to no impact on the Euro.

GBP/USD recovers above 1.3600, awaits US CPI for fresh impetus

GBP/USD recovers some ground above 1.3600 in the European session on Friday, though it lacks bullish conviction. The US Dollar remains supported amid a softer risk tone and ahead of the US consumer inflation figures due later in the NA session on Friday.

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Gold retreats from the vicinity of the $5,000 psychological mark, though sticks to its modest intraday gains in the European session. Traders now look forward to the release of the US consumer inflation figures for more cues about the Fed policy path. The outlook will play a key role in influencing the near-term US Dollar price dynamics and provide some meaningful impetus to the non-yielding bullion.

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