Mar 21, 2025
The dollar keeps recovering following the Federal Reserve meeting, while the pound declines.
The U.S. dollar increased on Friday, continuing its recent recovery after the Federal Reserve indicated there was no urgent need to lower interest rates.
At 05:25 ET (09:25 GMT), the Dollar Index, which measures the dollar against a group of six other currencies, was up 0.2% at 103.710, recovering from a five-month low reached earlier this week after gaining about 0.4% on Thursday.
The dollar regains strength
The Federal Reserve maintained its key interest rates earlier this week, as anticipated, while projecting slower economic growth and rising inflation for the year ahead.
Nevertheless, the U.S. central bank also noted that there was no immediate intention to reduce interest rates, and the jobless claims data released on Thursday suggested a robust labor market, which is a major factor in the Fed's monetary policy decisions.
"The U.S. data calendar is empty today. A day without significant data might provide better chances for the dollar to continue its recovery," analysts at ING remarked in a report.
"The Federal Reserve’s blackout period has officially ended, and the cautious stance taken by the FOMC and Chair Jerome Powell this week likely leaves room for adjustments in communication post-meeting. These adjustments are expected to follow the release of new data."
Sterling declines after BOE
In Europe, GBP/USD decreased by 0.3% to 1.2926, following the Bank of England's decision to keep its key interest rate unchanged at Thursday’s meeting.
"There were two significant points from the meeting," ING stated. "First, Catherine Mann quickly moved away from the dovish stance, leaving only one member opposing the decision to hold rates, and second, there was a note that if data indicates more instability in the job market, the BoE might draw conclusions related to disinflation and cut rates more swiftly."
EUR/USD fell by 0.1% to 1.0836 after European Central Bank President Christine Lagarde discussed the economic impact of a trade war with the United States on the eurozone.
Lagarde mentioned that a 25% tariff from the U.S. on European imports could reduce eurozone growth by approximately 0.3 percentage points in the first year, and retaliatory actions could increase this impact to about half a percentage point.
"The next significant support level for EUR/USD is likely the 1.0725 200-day moving average, which is now a critical benchmark for a return to a bullish sentiment for the dollar," ING added.
Yen weakens
In Asia, USD/JPY was up 0.4% at 149.39, with the Japanese yen weakening even though unexpectedly strong consumer inflation data for February kept traders attentive to potential further interest rate increases by the Bank of Japan.
The underlying consumer price index inflation surpassed the BOJ’s 2% annual target in February, aligning with the central bank's forecast of stronger wage growth leading to increased personal spending and inflation this year.
The BOJ is broadly anticipated to raise rates in May.
USD/CNY edged higher to 7.2494, as attention remains on additional stimulus measures from Beijing.
At 05:25 ET (09:25 GMT), the Dollar Index, which measures the dollar against a group of six other currencies, was up 0.2% at 103.710, recovering from a five-month low reached earlier this week after gaining about 0.4% on Thursday.
The dollar regains strength
The Federal Reserve maintained its key interest rates earlier this week, as anticipated, while projecting slower economic growth and rising inflation for the year ahead.
Nevertheless, the U.S. central bank also noted that there was no immediate intention to reduce interest rates, and the jobless claims data released on Thursday suggested a robust labor market, which is a major factor in the Fed's monetary policy decisions.
"The U.S. data calendar is empty today. A day without significant data might provide better chances for the dollar to continue its recovery," analysts at ING remarked in a report.
"The Federal Reserve’s blackout period has officially ended, and the cautious stance taken by the FOMC and Chair Jerome Powell this week likely leaves room for adjustments in communication post-meeting. These adjustments are expected to follow the release of new data."
Sterling declines after BOE
In Europe, GBP/USD decreased by 0.3% to 1.2926, following the Bank of England's decision to keep its key interest rate unchanged at Thursday’s meeting.
"There were two significant points from the meeting," ING stated. "First, Catherine Mann quickly moved away from the dovish stance, leaving only one member opposing the decision to hold rates, and second, there was a note that if data indicates more instability in the job market, the BoE might draw conclusions related to disinflation and cut rates more swiftly."
EUR/USD fell by 0.1% to 1.0836 after European Central Bank President Christine Lagarde discussed the economic impact of a trade war with the United States on the eurozone.
Lagarde mentioned that a 25% tariff from the U.S. on European imports could reduce eurozone growth by approximately 0.3 percentage points in the first year, and retaliatory actions could increase this impact to about half a percentage point.
"The next significant support level for EUR/USD is likely the 1.0725 200-day moving average, which is now a critical benchmark for a return to a bullish sentiment for the dollar," ING added.
Yen weakens
In Asia, USD/JPY was up 0.4% at 149.39, with the Japanese yen weakening even though unexpectedly strong consumer inflation data for February kept traders attentive to potential further interest rate increases by the Bank of Japan.
The underlying consumer price index inflation surpassed the BOJ’s 2% annual target in February, aligning with the central bank's forecast of stronger wage growth leading to increased personal spending and inflation this year.
The BOJ is broadly anticipated to raise rates in May.
USD/CNY edged higher to 7.2494, as attention remains on additional stimulus measures from Beijing.