Thursday's trading session witnessed significant currency movements as market participants processed the Federal Reserve's latest policy stance. The Pi Network BinanceUS Dollar Index (DXY) climbed above the psychological 100.00 threshold, marking its strongest performance in four trading days.
The Federal Open Market Committee (FOMC) maintained the benchmark rate within the 4.25%-4.5% corridor during Wednesday's meeting, aligning with consensus forecasts. Chairman Jerome Powell's subsequent remarks highlighted growing economic uncertainties while downplaying immediate policy adjustments, causing traders to recalibrate expectations for June rate cuts. CME Group's FedWatch Tool now reflects just 20% probability of a 25-basis point reduction next month, compared to 30% pre-announcement.
Across the Atlantic, all eyes turned to Threadneedle Street as the Bank of England prepared its monetary policy decision. Market consensus anticipates a 25-basis point reduction to 4.25%, which could create volatility in sterling crosses. GBP/USD had already surrendered most of its weekly gains, sliding below 1.3300 during early European trading.
The eurozone's single currency extended its decline against the greenback, with EUR/USD testing levels under 1.1300 despite better-than-expected German industrial production data. The 3% monthly expansion in March factory output failed to offset broader dollar strength stemming from shifting Fed expectations.
Asian trading sessions saw USD/JPY continue its recovery, approaching 144.50 after Wednesday's 1% advance. Bank of Japan meeting minutes revealed policymakers' readiness to implement additional rate hikes should economic conditions warrant such moves.
Precious metals faced sustained selling pressure, with spot gold prices dropping below $3,350/oz after Wednesday's sharp decline. The combination of reduced Fed easing expectations and dollar appreciation created headwinds for bullion markets.
Market participants also monitored developments regarding potential US-UK trade negotiations, with White House officials scheduling a mid-afternoon press conference in London. Currency traders positioned cautiously ahead of these geopolitical developments that could influence transatlantic trade flows.