Canada's annual inflation rate accelerated in February to hit a fresh 30-year high

•  The dollar fell on Wednesday after the U.S. Federal Reserve moved to a hawkish monetary policy
• The yen was pinned to a six-year low on the dollar today in the Asian session
• The U.S Federal Reserve raised rates for the first time since 2018

Forex market

The dollar fell in yesterday’s trading session after the U.S Federal Reserve moved to a hawkish monetary policy but without delivering a tougher surprise that might have added to its weeks-long momentum. 

The dollar index, which had gained 3% since the start of the Russia-Ukraine war on Feb. 24 and 10% since May, fell as much as 0.6% on Wednesday as traders parsed Fed statements following a two-day meeting. There were no additional hawkish surprises. 

The dollar lost value to the euro and the British pound, both of which had been up earlier in the day in the hope for a compromise in Russia and Ukraine peace talks. The euro and pound both gained 0.7%, with the euro trading at $1.1032. The Fed raised interest rates by the expected quarter of a percentage point and projected its policy rate would reach a range of 1.75% to 2% by the end of this year and 2.8% next year. 

Economic Calendar

The decline in the dollar index was surprising and could reflect disappointment that the Fed rhetoric was not more hawkish. The Fed did project the equivalent of quarter-percentage-point rate increases at each of its six remaining policy meetings this year but that was in line with market expectations for rates. Yields on 10-year U.S Treasuries reached 2.2% and two-year yields rose to 1%, flattening the yield curve. 

The Bank of England meets later in today’s session and markets expect it to raise rates by another quarter-point. The Bank of Japan is expected on Friday to leave ultra-loose policy settings in place. The dollar rose 0.4% on the Japanese yen and during the day touched 119.13 yen, the highest in more than five years. The commodity-sensitive Australian dollar added 1.3% to $0.7288.

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Euro-EUR

The single currency gained as the dollar fell after the U.S Federal Reserve moved to a hawkish monetary policy but without delivering a tougher surprise that might have added to its weeks-long momentum. The dollar index, which had gained 3% since the start of the Russia-Ukraine war on Feb. 24 and 10% since May, fell as much as 0.6% yesterday. Overall, the EUR/USD traded with a low of 1.0884 and a high of 1.0665 before closing the day around 1.0934 in the New York session.

Yen-JPY

The Japanese Yen was pinned to a six-year low on the dollar today, as a U.S rate hike and hawkish outlook underscored just how far the BoJ is likely to lag worldwide policy tightening, while stellar jobs data lifted the Australian dollar. Increasing the target federal funds rate by a quarter-percentage point, the U.S Fed raised rates for the first time since 2018. Overall, the USD/JPY traded with a low of 114.63 and a high of 115.53 before closing the day around 114.83 in the U.S session.

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British Pound-GBP 

The British Pound edged higher against the U.S dollar yesterday supported by optimism on negotiations between Ukraine and Russia, though a Bank of England rate decision capped gains. New talk of compromise from both Moscow and Kyiv on status for Ukraine outside of NATO lifted hope for a potential breakthrough after three weeks of the war. Overall, the GBP/USD traded with a low of 1.3200 and a high of 1.3353 before closing the day at 1.3238 in the New York session.

Canadian Dollar-CAD 

The Canadian Dollar traded higher as Canada's annual inflation rate accelerated in February to hit a fresh 30-year high, with broad price gains hitting consumers on all fronts, data showed yesterday, bolstering the case for the Bank of Canada to move forcefully on rates. At 5.7%, the gain beat analysts' estimates of a rise of 5.5% and is the highest since August 1991. Overall, USD/CAD traded with a low of 1.2667 and a high of 1.2789 before closing the day at 1.2735 in the New York session.

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Australian Dollar-AUD

The Australian Dollar gained as Australian employment surged in February as the economy recovered surprisingly quickly from an Omicron outbreak, driving unemployment down to lows not seen since 2008 and piling on the pressure for an early rise in interest rates. Figures from the Australian Bureau of Statistics today showed employment jumped by 77,400 in February from a month earlier. Overall, AUD/USD traded with a low of 0.7138 and a high of 0.7235 before closing the day at 0.7231 in the New York session.

Euro-Yen EUR/JPY 

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 40 and lies below the neutral zone. In general, the pair has lost 1.70%.

Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 42 reading and lies below the neutral zone. On the whole, the pair has lost 1.35%.

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Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 54 reading and lies above the neutral region. In general, the pair has gained 0.06%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 46 and lies below the neutral region. Overall, the pair has lost 0.35%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 40 and lies below the neutral region. In general, the pair has lost 0.86%.

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