The US dollar rose in European trade on Thursday and maintained the gains for the third straight session, about to hit a week high following the Fed’s first policy meeting this year.

The Fed’s remarks reduced the odds of a March interest rate cut, as investors now await important US data later today on GDP growth and unemployment claims. 

The Index

The dollar index rose 0.15% to 108.09, with a session-low at 107.81.

On Wednesday, the index rose 0.1%, hitting a week high at 108.30.

The Fed

The Federal Reserve held interest rates unchanged this week at 4.5% as expected by most analysts. 

It pointed to the steady economic growth and strong labor conditions, while unemployment held at low levels in recent months.

However, the Fed’s statement noted that US inflation remains at high levels, with the central bank still aiming at achieving the 2% inflation target in the long term.

The Fed will continue to reduce its holdings of treasury and financial bonds overall, and stands ready to amend monetary policies when needed. 

Powell

Fed Chair Jerome Powell said there’s no urgent need to cut interest rates currently, asserting the importance of balance in monetary policies, and cautioning against rapid loosening of monetary policies, which could hinder the fight against inflation.

Powell refused to comment on US President Donald Trump’s pressures on cutting interest rates, adding he hasn’t communicated with Trump yet.

US Rates

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in March fell from 30% to 17%.

Now markets await crucial US GDP growth data for the fourth quarter of last year, in addition to unemployment claims data. 

US GDP growth is expected to clock in at 2.7% in the fourth quarter, down from 3.1% in the third. 

Gold prices rose in European trade on Thursday, about to hit three-month highs as US 10-year treasury yields slowed down. 

The Fed maintained interest rates unchanged this week, with the markets now looking for more clues on the odds of a Fed rate cut in March.

Prices

Gold prices rose 0.65% today to $2776 an ounce, with a session-low at $2758 an ounce.

On Wednesday, gold prices lost 0.2% on profit-taking away from a three-month high at $2786.

US Yields

US 10-year treasury yields fell 0.3% on Thursday, extending losses for another session and about to hit a six-week trough, in turn pressuring the greenback.

The Federal Reserve held interest rates unchanged this week at 4.5% as expected by most analysts. 

It pointed to the steady economic growth and strong labor conditions, while unemployment held at low levels in recent months.

However, the Fed’s statement noted that US inflation remains at high levels, with the central bank still aiming at achieving the 2% inflation target in the long term.

The Fed will continue to reduce its holdings of treasury and financial bonds overall, and stands ready to amend monetary policies when needed. 

Powell

Fed Chair Jerome Powell said there’s no urgent need to cut interest rates currently, asserting the importance of balance in monetary policies, and cautioning against rapid loosening of monetary policies, which could hinder the fight against inflation.

Powell refused to comment on US President Donald Trump’s pressures on cutting interest rates, adding he hasn’t communicated with Trump yet.

US Rates

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in March fell from 30% to 17%.

Now markets await crucial US GDP growth data for the fourth quarter of last year, in addition to unemployment claims data. 

SPDR

Gold holdings at the SPDR Gold Trust rose 4.3 tons yesterday to a total of 865.34 tons, the highest since January 20.

The euro lost ground in European trade on Thursday and extended the losses for the third straight session against the dollar, moving away from a six-week high on profit-taking. 

The decline is still limited as investors prefer to shun risks and big positions ahead of the European Central Bank’s policy decisions this week.

The ECB will likely announce another interest rate cut while providing clues for the path ahead for the eurozone’s monetary policies.

The Price

The EUR/USD fell 0.1% today to $1.0410, with a session-high at $1.0429.

The pair fell 0.1% on Wednesday on profit-taking away from a six-week high at $1.0533.

The common currency also lost ground after US President Donald Trump’s tariff threats for Europe. 

The ECB

The European Central Bank will decide on its monetary policy later today, widely expected to cut interest rates for the first time this year.

The ECB recently said it’ll maintain a process based on assessing data and conditions at each meeting to decide on the appropriate levels of interest rates. 

Lagarde said in Davos last week that the eurozone inflation is expected to hit the 2% target this year.

Lagarde said the decline gives the European Central Bank the space to ease monetary policies and boost struggling economies.

Interest Rate Gap

The current US-eurozone interest rate gap stands at 135 basis points and will likely expand to 160 basis points this week, hurting the euro’s standing. 

The Japanese yen rose in Asian trade on Thursday on track for the second profit in a row against the dollar, and about to test a six-week high on the Bank of Japan’s outlook on normalizing monetary policies. 

The BOJ has been increasingly bullish in recent months, with most members now in favor of a stricter policy and higher interest rates.

The Japanese currency is also boosted by a drop in US 10-year treasury yields ahead of crucial US data that could provide important clues on the path ahead for Fed interest rates.

The Price

The USD/JPY pair fell 0.6% today to 154.28, with a session-high at 155.23.

The yen rose 0.2% against the dollar on Wednesday, resuming gains and approaching a six-week high at 153.71.

BOJ

Bank of Japan Governor Kazuo Ueda nominated a new BOJ member known for her hawkishness, Junko Kueda, to be joining the BOJ board in March.

She’s known for her support of a more restrictive approach to monetary policy, and will replace a known dove on the board, which dominated the BOJ for the past decade. 

Ueda has taken serious steps towards policy normalization as inflation remains above the target for three years now. 

US Yields 

US 10-year treasury yields fell 0.3% on Thursday, extending losses for another session and about to hit a six-week trough, in turn pressuring the greenback.

The Fed maintained interest rates unchanged this week but only provided limited clues on future rate cuts this year.

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in March fell from 30% to 17%.