Forex Today: The Fed smashes the dollar

FXStreet Team FXStreet

What you need to know on Thursday, March 18:

The dollar plummeted with the US Federal Reserve decision. As widely anticipated, the central bank left rates and quantitative easing unchanged. The Fed’s Summary of Projections showed on Wednesday that four policymakers see a lift-off in the fed funds rate from zero in 2022, compared to only one policymaker in December's publication. Additionally, the number of policymakers who see a lift-off in the fed funds rate from zero in 2023 rose to seven from five in December.

The yield on the benchmark 10-year Treasury note soared to 1.689% ahead of the Fed, but trimmed most of its intraday gains ahead of the close, ending the day at 1.64%.

Wall Street ended in the green, after a soft start to the day. The DJIA and the S&P closed at record levels after the Fed reaffirmed its ultra-loose monetary policy.

EUR/USD approaches 1.2000, while GBP/USD trades around 1.3960, cautiously bullish ahead of BOE’s Monetary Policy decision on Thursday. Commodity-lined currencies were the best performers, with AUD/USD above 0.7800 and USD/CAD at fresh yearly lows around 1.2400. The USD/JPY pair is little changed down to 108.80.

Gold advanced to 1,750, ending the day at $ 1,744 a troy ounce. WTI was little changed, with the barrel trading at $64.50.

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EUR/USD keeps the rangebound trade near 1.1850

EUR/USD is still under pressure, drifting back towards the 1.1850 area as Monday’s session draws to a close. The modest decline in spot comes as the US Dollar picks up a bit of support, while thin liquidity and muted volatility, thanks to the US market holiday, are exaggerating price swings and keeping trading conditions choppy.

GBP/USD flirts with daily lows near 1.3630

GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.

Gold sticks to a negative bias below $5,000; lacks bearish conviction

Gold remains depressed for the second consecutive day and trades below the $5,000 psychological mark during the Asian session on Tuesday, as a positive risk tone is seen undermining safe-haven assets. Meanwhile, bets for more interest rate cuts by the Fed keep a lid on the recent US Dollar bounce and act as a tailwind for the non-yielding bullion, warranting caution for bearish traders ahead of FOMC minutes on Wednesday.

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