Thursday was one of the most volatile days ever in the forex market. After the Federal Reserve cut rates as expected, the US dollar grew stronger against all major currencies. The EUR/USD currency pair lost bullish momentum and retreated below the key 1.1700 level. This drop followed it hitting an eight-week high just beforehand in the Asian session. The USD/CAD currency pair remains under pressure, holding above the 1.3800 area. This movement follows the Bank of Canada’s announcement it is holding its key interest rate steady.
Entering the European session, the GBP/USD pair faced resistance from sellers at the $1.200 level. This drop followed on the heels of hawkish sounding remarks from Bank of England Deputy Governors in defense of a gradual easing cycle. The AUD remained supported with Australian unemployment for November unchanged at 4.3% m/m.
The US dollar recovered from sharp losses earlier in the session. It was up 0.05% versus euro, 0.13% versus pound and 0.08% versus Japanese yen. These movements came on the heels of the Federal Reserve’s announcement to cut rates. They hinted at future changes being paused or at least teasing them with their own hints.
Specifically, the EUR/USD currency pair opened Thursday’s trading at an eight-week high but failed to maintain its bullish momentum. It indeed fell below the magic psychological level of 1.1700. Traders were swift to react as US monetary policy began to pivot, along with overall market sentiment. If failing to hold above this level shows a change in market dynamics toward the dollar, we have some serious problems on our hands.
The USD/CAD did not have much of a chance as Canadian monetary policy stayed rock solid. To the surprise of many, the Bank of Canada on September 6 decided to hold its key interest rate at 2.25%. This decision has stoked a bearish mood on the Canadian loonie. Consequently, USD/CAD is trading defensively but still sits comfortably above the 1.3800 handle.
The GBP/USD currency pair attracted sellers as it approached the key $1.200 level. This decrease reflects the broader market concerns around the UK’s economic outlook and rising inflation. A review of recent pronouncements by senior leaders at the Bank of England indicates a relatively tame easing cycle. This has added to the downward pressure on the pound.
Australia’s unemployment rate remained steady at 4.3% for November, indicating stability in the labor market despite global economic challenges. This joint consistency can provide firming support for the Australian dollar. Market participants will sift through the text to determine what it means for upcoming monetary policy.
In commodities, silver saw a significant correction after rising to its high for the day earlier in the session. After climbing to an all-time high of $62.89 it has since retraced back down to around $62.00. The volatility we have witnessed in silver prices is an indication of strong investor interest and market speculation that is characteristic of precious metals.
The strength of the US dollar is directly connected to all of the Federal Reserve’s movements in the last month. On Wednesday, they pulled off quite the feat in announcing a deeply expected rate cut. This step has greatly enhanced public confidence in the dollar. It has further spurred speculators to re-position themselves speculatively from the Yuan versus other currencies.