Forex Today: US Dollar holds ground in Fed aftermath, eyes on BoE
Here is what you need to know on Thursday, June 19:
The US Dollar (USD) stays resilient against its rivals early Thursday as markets assess the Federal Reserve's (Fed) policy announcements. Later in the day, the Bank of England is forecast to maintain its bank rate at 4.25%. Financial markets in the US will remain closed in observance of the Juneteenth holiday.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.60% | 1.11% | 0.54% | 0.95% | 0.19% | 0.72% | 0.92% | |
| EUR | -0.60% | 0.40% | -0.07% | 0.36% | -0.30% | 0.13% | 0.32% | |
| GBP | -1.11% | -0.40% | -0.43% | -0.06% | -0.69% | -0.26% | -0.08% | |
| JPY | -0.54% | 0.07% | 0.43% | 0.39% | -0.67% | -0.18% | -0.04% | |
| CAD | -0.95% | -0.36% | 0.06% | -0.39% | -0.68% | -0.23% | -0.04% | |
| AUD | -0.19% | 0.30% | 0.69% | 0.67% | 0.68% | 0.43% | 0.62% | |
| NZD | -0.72% | -0.13% | 0.26% | 0.18% | 0.23% | -0.43% | 0.19% | |
| CHF | -0.92% | -0.32% | 0.08% | 0.04% | 0.04% | -0.62% | -0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The Fed left the policy rate unchanged at the 4.25%-4.5% after the June meeting, as widely expected. The revised Summary of Economic Projections (SEP) showed that policymakers are still expecting interest rates to be lowered by a total of 50 basis points (bps) in 2025, while projecting only a single 25 bps cut in 2026. In the post-meeting press conference, Fed Chairman Jerome Powell said that tariff increases are likely to weigh on economic activity and push up inflation. Powell noted that they are "well-positioned" to wait and learn more before considering policy adjustments. The USD Index clings to small daily gains at around 99.00 after closing flat on Wednesday.
In the meantime, citing unnamed sources, Bloomberg reported early Thursday that US officials prepare for a possible strike on Iran in coming days. Similarly, the Wall Street Journal claimed that US President Donald Trump has approved attack plans on Iran earlier this week but wanted to wait to see if Tehran would abandon its nuclear program. Markets remain cautious on growing concerns over a widening conflict in the Middle East with the direct involvement of the US.
The Swiss National Bank (SNB) announced on Thursday that it cut the benchmark Sight Deposit Rate by 25 bps to 0% from 0.25%, as anticipated. USD/CHF pulls away from session highs and trades at around 0.8200 after the SNB decision.
After posting small losses on Wednesday, GBP/USD continued to stretch lower in the Asian session on Thursday and touched its lowest level in nearly a month below 1.3400. The pair holds steady slightly above 1.3400 in the European morning as markets await the BoE's policy decisions.
EUR/USD struggles to gain traction and trades near the lower limit of its weekly range below 1.1500.
USD/JPY struggles to find direction and fluctuates in a narrow channel above 145.00 early Thursday. According to Reuters, the Japanese government plans to reduce sales of super-long bonds by about 10% from the initial plan in a rare revision to its bond programme for the current fiscal year, trimming overall bond issuance as a result.
Gold stays on the back foot and trades slightly above $3,350 after losing about 0.6% on Wednesday.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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.
