A strong loss on Wednesday that was sparked by FOMC Chairman Jerome Powell’s dovish comments, the US Dollar Index remains weak and trades at its lowest level in almost ten months at about 101.00. The policy choices will be announced on Thursday by the European Central Bank (ECB) and the Bank of England (BOE).
Following the release of formal remarks, BOE Governor Andrew Bailey and ECB President Christine Lagarde will address the policy outlook and answer press inquiries. Later in the day, the US economic docket will include information on the weekly initial claims for unemployment benefits and the fourth quarter unit labor cost figures. As anticipated, the Federal Reserve increased the policy rate by 25 basis points, bringing it to a range of 4.5–4.75%.
The US central bank said that it expects continued rises in the target range to be reasonable while noting that inflation “has moderated slightly but remains excessive” in the policy statement.
Although the first response gave the US Dollar an advantage over its competitors, the currency was heavily sold off during Chairman Powell’s press conference. Powell sought to persuade the markets once more that there won’t be a rate drop in 2023, but he also conceded that the process of deflation has already begun. The Chairman said that if inflation declines more quickly than anticipated, it would affect policy.
The result was a rise in the major Wall Street indices, a steep drop in the benchmark yield on the benchmark 10-year US Treasury note, and significant losses for the US dollar.
