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