Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback extends recent rebound
The US dollar strengthened overnight after the US Federal Reserve announced it would keep interest rates unchanged but, importantly, provided no guidance it was now more likely to loosen monetary policy.
The central bank said it was wary of inflation risks mainly due to US President Donald Trump’s tariff programs. The Fed also pointed to recent geopolitical tensions and surging oil prices. These concerns are keeping policymakers on alert for potential upward pressure on consumer prices.
Despite holding rates steady, the Fed signaled it remains open to cutting rates later this year. The central bank’s latest projections still signal two potential rate cuts before year-end.
Aussie, kiwi ease from multi-month highs
FX markets were muted as the US dollar edged higher following the Fed’s announcement. The US dollar index reached a one-week high as it extended a recent stronger run.
In Asia, most markets fell after the Fed announcement. The AUD/USD dipped from levels near a seven-month high.
The NZD/USD eased from near an eight-month peak.
In Asia, USD/CNH ticked up modestly, while USD/SGD slipped.
Focus shifts to European central banks
Attention now turns to Europe, where key central bank decisions are expected tonight.
The Swiss National Bank is widely anticipated to lower its benchmark rate from 0.25% to 0.00%, and now on course for a potential return to the negative rates that were in place before the pandemic.
CHF at 10-year highs versus the USD thanks to the Swissie’s safe-have appeal.
Later, the Bank of England is also expected to keep interest rates on hold. Despite cooling inflation, the central bank is likely to remain cautious in its approach.
USD inches higher
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 16 – 21 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
