Forex Today: BoE is up next as markets digest Fed policy decisions

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

Following the wild fluctuations seen in financial markets in the American session on Wednesday, volatility remains high early Thursday. The Bank of England (BoE) will announce monetary policy decisions during the European trading hours. Later in the day, the US economic calendar will feature weekly Initial Jobless Claims, August Existing Home Sales and September Philadelphia Fed Manufacturing Survey data.

Following the two-day policy meeting, the Federal Reserve (Fed) announced that it lowered the policy rate by 50 basis points (bps) to the range of 4.75%-5%. The revised Summary of Economic Projections (SEP), the so-called dot-plot, showed that policymakers foresee two more 25 bps rate reductions in the last two meetings of the year. The immediate reaction to the Fed policy decision triggered a heavy selloff in the US Dollar (USD).

In the post-meeting press conference, however, Chairman Jerome Powell reiterated that they remain attentive to the risks on the both sides of the mandate. "If the economy remains solid, we can dial back the pace of cuts; equally, if the labor market deteriorates, we can respond," Powell added. After slumping to its lowest since July 2023 at 100.21, the USD Index staged a rebound and closed the day flat. In the early Asian session, the USD Index extended its recovery toward 101.50 but lost its traction. At the time of press, the index was in negative territory below 101.00. In the meantime, the benchmark 10-year US Treasury bond yield holds steady at around 3.7% after rising more than 1.5% on Wednesday and US stock index futures trade decisively higher after Wall Street's main indexes ended the previous day marginally lower.

The BoE is forecast to maintain the policy rate at 5%. Since there will not be a press conference, investors could react to changes in the policy statement and the vote split. After touching its highest level in over two years near 1.3300, GBP/USD erased a large portion of its daily gains on Wednesday. The pair holds its ground in the European morning on Thursday and trades at around 1.3250.

During the Asian trading hours, the data from Australia showed that the Unemployment Rate was unchanged at 4.2% in August as expected. In this period, the Employment Change was up 47.5K, better than analysts' estimate for an increase of 25K. AUD/USD gathered bullish momentum and climbed to a fresh 2024-high above 0.6800.

EUR/USD spiked toward 1.1200 with the immediate reaction to the Fed but lost its traction to close the day flat. The pair benefits from the renewed selling pressure surrounding the USD and rises toward 1.1150 on Thursday.

USD/JPY advanced to its highest level in nearly two weeks at 143.95 during the Asian trading hours on Thursday but reversed its direction. At the time of press, the pair was virtually unchanged on the day, trading near 142.20.

Gold reached a new all-time high of $2,600 in the American session on Wednesday. Although XAU/USD made a sharp U-turn and ended the day in the red, it started to gather bullish momentum early Thursday. XAU/USD was last seen rising more than 0.7% on the day near $2,580.