Seemingly Neutral Fed’s Stance Surprisingly Caused Another Wave of USD Ascension

The yesterday’s Fed's policy decision interrupted a series of 10 consecutive rate hikes, but projections, or a dot plot, showed that policymakers expect 2 more hikes by the end of 2023. Chairman Jerome Powell said a rate cut in 2023 would be inappropriate. The Fed’s dot-schedule revision was more abrupt than many economists expected. Many of them thought the [dot plot] update would reflect the possibility of just one more rise.

By noon GMT on Thursday, the U.S. Dollar index, DXY, was up 0.2% to 103.23, recovering from a 4-week low of 102.66 on Wednesday. The euro was last unchanged against the dollar at $1.0817 after hitting a 4-week high of $1.0865 on Wednesday. The emerging new cycle of the U.S. Dollar strengthening isn’t actually good news for the American economy, which is already experiencing a harsh impact from ultra-high banking interest rates, discouraging promising startups and LLC’s from borrowing. Judging by the recent Q1 earnings reports, at least a third of all public companies faced a currency exchange rate headwind, washing their businesses off many crucial foreign consumer markets.

Meanwhile, market attention is now focused on other central bank decisions later this week, with the ECB announcing policy later tonight, on Thursday June 15, before the Bank of Japan's decision on Friday. Money market traders expect the ECB to raise its deposit rate by 25 basis points. A further quarter-point increase is expected in July.