US Dollar faces a strong blow
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The US Dollar (USD) experienced a broad decline on Thursday, driven by increasing investor conviction that U.S. interest rates had reached their peak. This sentiment was reinforced after the Federal Reserve decided to maintain interest rates at their current levels the previous day.
In contrast, the British Pound (Sterling) remained stable following the Bank of England's decision to keep rates at a 15-year high. The Bank of England also emphasized its intention not to initiate rate cuts in the near future.
Federal Reserve Chair Jerome Powell left the possibility of another interest rate hike open. However, he acknowledged that the funds rate target ceiling had reached a 22-year high at 5.5%, and he emphasized that the risks of taking too much or too little action were now balanced.
In response to Powell's statements, the financial markets interpreted this as a signal to maintain a low probability (sub 20%) of interest rate increases occurring in December. As a result, ten-year Treasury yields decreased by 24 basis points from their highs on Wednesday, equities rallied, and currencies sensitive to risk also saw positive movements.
Kristoffer Lomholt, the head of FX research at Danske Bank, noted that Powell had the opportunity to express concern about the recent rise in short-term inflation expectations but chose not to do so.
