Forex Today: It's all about the Fed

Eren Sengezer FXStreet

Here is what you need to know on Wednesday, July 26:

Financial markets stay relatively calm early Wednesday as investors move to the sidelines while waiting for the US Federal Reserve (Fed) to conclude its two-day policy meeting. Following the announcement of the rate decision and the release of the policy statement at 1800 GMT, FOMC Chairman Jerome Powell will comment on the policy outlook and respond to questions at a press conference starting at 1830 GMT. The US economic docket will also feature New Home Sales for June.

The positive shift seen in risk sentiment made it difficult for the US Dollar (USD) to preserve its strength during the American trading hours on Tuesday. The US Dollar Index (DXY), which touched a two-week-high above 101.60 earlier in the day, reversed its direction and closed in negative territory, snapping a five-day winning streak. Early Wednesday, DXY fluctuates in a tight range above 101.00. Meanwhile, the benchmark 10-year US Treasury bond yield continues to move up and down between 3.8% and 3.9%.

Previewing the Fed event, "I want to stress that a 25 bps hike is fully priced in, and will not have an impact on markets," said FXStreet Analyst Yohay Elam. "Investors are laser-focused on hints about the next moves. The Fed does not publish new forecasts at this meeting, letting the statement talk first. Then, Fed Chair Powell will take the stage, answering questions and triggering the lion's share of volatility."

Federal Reserve Preview: Powell can play three distinct cards, each with a different US Dollar move.

EUR/USD fell to 1.1020 in the European session on Tuesday but erased a large portion of its losses in the second half of the day. At the time of press, EUR/USD was trading modestly higher on the day above 1.1050.

The data from Australia showed that the Consumer Price Index rose 0.8% on a quarterly basis in the second quarter. This reading followed the 1.4% increase recorded in the first quarter and came in below the market expectation of 1%. On a yearly basis, the CPI rose 5.4% in June as expected. AUD/USD fell sharply with the immediate reaction to inflation data and touched a daily low of 0.6734 before recovering back above 0.6750.

GBP/USD benefited from risk flows and registered strong daily gains on Tuesday. The pair stays in a consolidation phase at around 1.2900.

USD/JPY closed the second straight day in the red on Tuesday. Ahead of Friday's policy announcements, “Japan's long-term yield rate remains stable under the yield curve control (YCC) policy,” BoJ Governor Kazuo Ueda reportedly told a Japanese government official.

Gold edged higher during the American trading hours on Tuesday and continued to stretch higher toward $1,970 early Wednesday.

Following Monday's sharp decline, Bitcoin continues to move in a very tight channel above $29,000. Ethereum registered small gains on Tuesday but lost its recovery momentum before testing $1,900. Early Wednesday, ETH/USD holds steady at around $1,860.

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.

AUD/USD rejected at 0.70 as hot US CPI revived Fed hike threat

The Aussie Dollar ends Wednesday’s session with a 0.17% loss against the US Dollar, as high US inflation sent US yields higher amid expectations that the Federal Reserve may hike rates late this month. The AUD/USD trades at 0.6971 after hitting a high above 0.7000.

USD/JPY slides back below 158.00 as USD reverses post-CPI gains

USD/JPY extends the previous day's pullback from a three-week high, attracting follow-through selling and sliding below 158.00 during Thursday's Asian session. Traders remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. The US Dollar, meanwhile, reverses Wednesday's hot CPI-led gains to April 2025 highs as US bond yields retreat, further pressuring the currency pair.

Gold remains offered below $4,100

Gold adds to the weekly bearish tone and slips back below the $4,100 mark per troy ounce on Wednesday. Indeed, the precious metal continues to suffer the stronger US Dollar and rising US Treasury yields as bets for extra tightening by the Fed remain on the rise following US inflation figures.

Australia Unemployment Rate forecast to remain at 4.6% in September

The Australian Bureau of Statistics will publish the September employment report on Thursday at 00:30 GMT. The Australian Dollar could see a big reaction to the jobs data if the numbers significantly alter market expectations for another interest rate hike by the Reserve Bank of Australia later this year.

Ethereum falls below $2,500 as hot CPI raises Fed hike odds

Ethereum extended its decline below $2,500 on Wednesday after a hotter-than-expected US inflation print renewed selling across the crypto market. At the time of writing, the top altcoin trades near $2,430, down 3.1% in the past 24 hours. The US Consumer Price Index for September rose 0.6% monthly, in line with market forecasts and up from a 0.4% increase in August.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?