The US Dollar (USD) reached a four-month low on Thursday, reacting to the Federal Reserve’s indication that its interest-rate hiking cycle might conclude, with expectations of lower borrowing costs emerging for 2024.
The recent Federal Open Market Committee (FOMC) meeting announced the shift in monetary policy. Fed Chair Jerome Powell signalled an end to the historic tightening and suggested possible rate cuts next year.
On the same day, Europe witnessed a series of central bank announcements, each with varying impacts on their respective currencies.
The European Central Bank (ECB) maintained its interest rates at a record high, with no immediate signs of policy easing, while the Swiss National Bank kept its rates steady. Notably, the Norwegian crown experienced a boost after an unexpected rate hike by the Norges Bank. In contrast, the Bank of England held its interest rates, leading to a rise in the pound against the dollar.
Following these developments, the US Dollar index fell, and markets now anticipate a potential rate cut by the Fed in March.
The euro and the Swiss franc showed varied responses, with the euro holding gains and the franc showing mixed reactions against the euro and dollar. The yen also strengthened against the dollar amidst speculation about the Bank of Japan’s upcoming policy meeting. The Australian dollar and the New Zealand kiwi also experienced significant rises following domestic economic data.
