Global overview
The USD has ended higher as the Fed kept rates on hold but continued to press that US rates will be higher for longer. Looking forward, all eyes are on the Bank of England tonight.
Greenback stronger on Fed’s tough talk
The US dollar ended higher in a volatile session overnight as the US Federal Reserve kept interest rates on hold.
The Fed kept official rates at its current range between 5.25% and 5.50%.
The overall tone of the Fed’s statement indicated the central bank might need to raise rates further by the end of the year.
The Fed’s projections are still looking for another 25-basis point rate hike by the end of the year, with the benchmark rate seen at 5.1% at the end of 2024. The Fed had forecast the 2024 rate at 4.6% in previous projections.
A stronger than expected performance from the US economy is keeping the heat on the Fed but also providing support to the US dollar.
The Fed upgraded forecasts for US economic growth from 0.4% earlier in the year to 2.1%.
Aussie gives up gains
The AUD/USD was initially stronger after the Fed’s decision, with the pair near one-month highs, but the Aussie later reversed to end down 0.1%.
The kiwi also gave up gains to end down 0.1%.
The USD/CNH and USD/SGD both gained 0.1%.
Pound weaker ahead of BoE
The Bank of England is tonight’s major announcement with a recent drop in inflation creating even more uncertainty around the potential outcome.
On Wednesday, the latest inflation report saw headline annual inflation at 6.7% (versus 7.0% expected) while the core number came in at 6.2% (versus 6.8% expected).
The lower inflation report eases the pressure on the Bank of England with tonight’s decision seen as a 50-50 chance according to market pricing.
The British pound has recently weakened with the GBP/USD falling to three-month lows. The British pound has fallen versus most other major currencies.
Greenback ends higher as Fed signals rates to stay high
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 18 – 22 September
All times AEST
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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.
