US Dollar stays firm, faces five G20 central bank announcements this Thursday

• The US Dollar trades firmly in the green after making new highs. 
• Several central banks from G20 nations report this Thursday.
• The US Dollar Index prints a new six-month high but fades ahead of yearly high.

The US Dollar (USD) gained in strength as US Federal Reserve (Fed) Chairman Jerome Powell delivered what was expected: a hawkish pause. The devil was in the details in the US Dot Plot (Phillips curve), where the Fed remains above 5% for the better part of 2024. In the previous forecast, the Dot Plot showed rates between 4.5% and 5%. This surprise jacked up the 2-year US Treasury yield,  which peaked at a 16-year high at 5.1973%. That news fuelled a rally in the Greenback. 

Expect to see more volatility pick up this Thursday as a packed calendar for the US is not the only game in town. Five G20 central banks are set to issue rate decisions on Thursday. All eyes will be on Scandinavia, Switzerland, the United Kingdom and India as the most important ones.  Expect to see some interesting moves across the markets, especially in the forex crosses where rate decisions will need to be digested and demand repricing. 

Daily digest: US Dollar facing outside forces

• Swedish Riksbank hiked 25 basis points as expected to 4% and saw some Swedish Krona strength rippling through in USD/SEK and EUR/SEK.
• The Swiss National Bank (SNB) kept its policy unchanged at 1.75% against the odds of hiking to 2%. The Swiss Franc gets hammered against the USD (USD/CHF) and EUR (EUR/CHF). 
• The Norwegian central bank, Norges Bank, hiked as expected from 4% to 4.25%. The Norwegian Krone strengthens in USD/NOK and EUR/NOK. 
• The British central bank kept its benchmark rate unchanged at 5.25%, where an increase to 5.50% was expected. Even the surprise uptick in recent inflation numbers made the BoE split over wether to hike. The knife edge vote came out at 5-4, in favor of a pause in stead of a hike. The split decision together with the unchanged stance makes the Pound Sterling fall near 0.70% against the US Dollar (GBP/USD).
• At 12:30 GMT the US calendar kicks off with Jobless Claims. Both the Continuing and Initial are expected to only marginally grind higher. The Initial is set to head from 220,000 to 225,000. The Continuing Claims are expected to head from 1,688,000 to 1,695,000 from last week.
• At that same time the Philadelphia Fed Manufacturing Survey for September will come out, from 12 to -0.7. 
• Around 14:00 GMT,  Existing Home Sales arrive with the previous index at -2.2%. No forecast is available for this release. 
• The US Treasury at 15:30 GMT will auction a 4-week bill at a substantially higher rate after the Fed decision overnight. 
• Equities are in the red across the board in a flight to safety. It makes sense that equities are on the back foot as higher rates means less money flowing into equities with funding costs rising again on the back of the US Fed rate decision. 
• The CME Group FedWatch Tool shows that markets are pricing in a 68.5% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. The last rate hike is expected for either December of January 2024.
• The benchmark 10-year US Treasury yield trades at 4.4192%, which is a 15-year high. The whole US yield curve got propped up higher after the US Dot Plot revealed Fed officials see rates higher for longer in 2024.  

US Dollar Index technical analysis: Will it get there?

THe US Dollar breaks higher and prints another six-month high in the US Dollar Index (DXY). No yearly high just yet though, as 105.88 remains unthreatened for now. Expect with all the other central banks hiking this Thursday, that some headwinds could emerge for the Greenback with several currency crosses being repriced. 

The US Dollar Index (DXY) has edged up, reaching 105.68. Should the DXY close above the yearly high, expect the US Dollar to follow on with more bullish moves in the medium turn.

On the downside, the 104.44 level seen on August 25 kept the Index supported on Monday, halting the DXY from selling off any further. Should the uptick that started on September 12 reverse and 104.44 give way, a substantial downturn could take place to 103.04, where the 200-day Simple Moving Average (SMA) comes into play for support.