Forex Today: BoJ maintains status quo, BoE up next

Here is what you need to know on Thursday, December 19:

Following the Federal Reserve's (Fed) and the Bank of Japan's (BoJ) monetary policy announcements, the Bank of England (BoE) is next in line to release its interest rate decision on Thursday. In the second half of the day, the US economic calendar will feature weekly Initial Jobless Claims and November Existing Home Sales data. Additionally, the US Bureau of Economic Analysis will publish the final revision to the third quarter Gross Domestic Product (GDP) growth.

The Fed cut its policy rate by 25 basis points (bps) to the range of 4.25%-4.5% after the last meeting of the year. The Fed made small changes to its policy statement from the November meeting, reiterating that they will assess incoming data, evolving outlook and balance of risks when considering the extent and timing of additional rate adjustments. Meanwhile, the revised Summary of Economic Projections (SEP) showed that Fed projections imply 50 bps of rate cuts in 2025. In the post-meeting press conference, Fed Chairman Jerome Powell explained that stronger economic growth and lower unemployment point to a slower rate-cut path, adding that they can be cautious going forward. The US Dollar (USD) Index gathered bullish momentum and reached its highest level since November 2022 above 108.00 in the late American session before going into a consolidation phase early Thursday.

The BoJ decided to keep the short-term rate target unchanged in the range of 0.15%-0.25% after concluding its two-day monetary policy review meeting. The decision came in line with the market expectations. However, hawkish board member Naoki Tamura dissented and proposed raising interest rates to 0.5% on the view inflationary risks were building. In the meantime, BoJ Governor Kazuo Ueda said that they will keep adjusting the degree of easing if the economic and the price outlook is to be realized. After posting strong gains on Thursday, USD/JPY continues to push higher and was last seen trading at its highest level in over a month above 156.00.

The BoE is forecast to leave the policy rate unchanged at 4.75%. Since there will not be a press conference, the statement language and the voting split could drive Pound Sterling's valuation. After losing more than 1% on Wednesday, GBP/USD stages a modest rebound and trades at around 1.2600 early Thursday.

EUR/USD came under heavy bearish pressure in the American session on Wednesday and dropped below 1.0350. The pair corrects higher early Thursday and trades near 1.0400.

Gold declined sharply and lost more than 2% on a daily basis on Thursday as the US Treasury bond yields rallied higher on the hawkish dot plot. After dipping below $2,600, Gold gains its traction early Thursday and trades above $2,600, rising more than 1% on the day.