Forex Today: Focus on BoE and ECB as Post-Fed Dollar Weakness Continues

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This is what you need to know to trade today Thursday February 2:

The US Dollar DXY Index remains lower and is trading at its lowest level in almost 10 months at around 101.00, after Wednesday’s sharp fall caused by the Dovish remarks from the FOMC ChairmanJerome Powell. The Bank of England (BoE) and the European Central Bank (ECB) will announce their policy decisions on Thursday. BoE Governor Andrew Bailey and ECB President Christine Lagarde will comment on the policy outlook and answer questions from the press following the release of the official statements. Initial jobless claims and fourth-quarter unit labor costs will be published later in the US economic calendar.

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The Federal Reserve raised the official interest rate by 25 basis points, up to the 4.50%-4.75% range, as expected. In the statement, the US central bank stated that inflation “has moderated a bit, but remains high” and repeated that the Committee anticipates that continued increases in the target range will be appropriate. Although the initial reaction helped the dollar strengthen against its rivals, the currency came under strong selling pressure during Chairman Powell’s press conference.

Once again, Powell tried to convince markets that there will be no rate cut in 2023, but acknowledged that the disinflationary process has begun. The President also said that if inflation falls faster than expected, that will influence monetary policy. Meanwhile, Wall Street’s main indices gained ground, the benchmark 10-year US Treasury yield fell sharply and the dollar suffered heavy losses.

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Driven by the broad weakness of the dollar, the pair EUR/USD posted impressive profits and broke above the 1.1000 level for the first time since early April. The ECB is expected to raise its key rate by 50 basis points after the first policy meeting in 2023. Lagarde made some surprisingly harsh comments in December and market participants will be looking for confirmation of the ECB’s willingness to continue raising rates to fight inflation.

See: European Central Bank preview: Lagarde must repeat her hardline message

The GBP/USD broke a three-day losing streak on Wednesday and gained more than 50 pips. The pair remains in a consolidation phase slightly below 1.2400 early Thursday. Too the BoE is expected to opt for a 50 basis point hikebut investors are refraining from betting sterling further for now, amid the possibility that the BoE signals the end of the tightening cycle on worsening growth prospects.

Watch: BoE Interest Rate Decision Preview: The Last 50 Basis Point Rise, But It’s Not The End Yet

The USD/JPY it lost over 100 pips on Wednesday and broke below 129.00. Bank of Japan Deputy Governor Masazumi Wakatabe said early Thursday that the BoJ must not become complacent, since the downward pressures on prices continue to be very strong. Following these comments, the pair remains relatively calm slightly above 128.50.

The price of Prayed it took advantage of falling US Treasury yields and hit its highest level since April near $1,960 before easing back towards $1,950.

The Bitcoin it reached its highest level since August above $24,200 late on Wednesday, but struggled to maintain its bullish momentum. BTC/USD is now moving sideways around $23,800. The ethereum it gained nearly 4% on Wednesday and is still rising early Thursday. At time of writing, ETH/USD is up 1.6% on the day at $1,670.

Source: Fx Street

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