USDJPY rallies to seven-month high as Fed defends hawks despite no rate change verdict

Federal Reserve announced the much-awaited pause to its rate hike trajectory on Wednesday but markets made a peace with a hawkish halt with upbeat economic forecasts and the policymakers’ readiness to assess more details for each upcoming rate increase.

US Dollar dropped on the Fed announcements before reversing the losses so far on Thursday. The same joins the upbeat US Treasury bond yields, softer Japan data and dovish BoJ bias to propel the USDJPY. With this, the Yen pair rises the most among the G10 currency pairs while refreshing the yearly high.

On the other hand, Australia’s strong employment data failed to impress AUDUSD bulls amid softer China figures and broad US Dollar strength. Alternatively, New Zealand’s downbeat GDP and statistics from Beijing, as well as a firmer USD, weighed on the NZDUSD. It should be noted that EURUSD and USDCAD remain on the dicey floor, printing mild gains as traders await the ECB Interest Rate Decision. Furthermore, Gold price drops to a three-month low but Oil bear struggled amid mixed signals.

Elsewhere, Cryptocurrencies suffer from firmer US Dollar and regulatory fears as BTCUSD and ETHUSD refresh three-month lows.

Following are the latest moves of the key assets:

• Brent oil prints mild losses near $73.40 at the latest.
• Gold price drops to three-month low of around $1,930 during five-day downtrend as we write.
• USD Index recovers from three-week low, snaps two-day downtrend at 103.20.
• Wall Street closed mixed but the Asia-Pacific shares grind higher. That said, the equities in the UK and Europe remain mixed by the press time.
• BTCUSD and ETHUSD decline to the lowest levels since March to near $24,900 and $1,640 respectively at the latest.

US Dollar cheers Fed’s hawkish hold

The Fed’s “higher for longer” mantra supersede the pause in the rate increases and allowed the US Dollar, as well as yields, to remain firmer even as rate cuts were teased to arrive as soon as 2025. Adding strength to the greenback were fears of slower economic recovery in China versus upbeat economic forecasts from the FOMC.

Elsewhere, Australian employment and inflation clues bolstered hawkish bias surrounding RBA but China’s MLF rate cut and downbeat numbers from Australia’s biggest customer failed to impress AUDUSD bulls. USDJPY occupied the other stand as BoJ policymakers’ repeated defense of easy-money policy joins unimpressive Japan data and strong yields.

It should be noted that Gold is poking the key support and may refresh the yearly low on breaking the same whereas Brent Oil is likely to decline further amid fears of less energy demand, despite short supplies.

Cryptocurrencies also remain on the back foot as fears of industry-wide regulations, due to asset classifications, join the firmer US Dollar.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

More clues to confirm July Fed hike, ECB eyed

While the Fed is off the table, the ECB is yet to shake markets with its 0.25% rate hike. Also important to watch will be US Retail Sales, manufacturing data and second-tier job numbers. In a case where the US numbers arrive as upbeat and the ECB fails to convince hawks, the US Dollar will have more upside moves to portray.

May the trading luck be with you!