Forex Today: Markets eagerly await SNB rate decision, Powell and Lagarde

Here is what you need to know on Thursday, September 26:

After witnessing a solid turnaround in American trading on Wednesday, the US Dollar (USD) pauses its recovery and remains in a consolidative mode heading into the European opening bells on Thursday.

Traders turn cautious and refrain from placing fresh bets on the USD before the release of the pre-recorded speech by US Federal Reserve (Fed) President Jerome Powell. A host of other Fed officials are also due to make their scheduled appearances along with Chair Powell, with their respective speeches trickling in from 13:10 GMT.

The Fed commentary will be critical to gauging the size of the next rate cut in November. Markets are already pricing in a 61% chance of a 50 basis points (bps) rate reduction, according to the CME Group’s Fed WatchTool.

Fed Governor Adriana Kugler said late Wednesday that she “strongly supported” the Fed’s decision to cut the interest rates by a half point last week. Kugler added that she “will support additional rate cuts going forward.”

Apart from the Fedspeak, investors will also look to the mid-impact US Durable Goods Orders and the Jobless Claims data for fresh trading directives.

The US Dollar also stalls its previous upswing, as risk sentiment turns positive, courtesy of the renewed optimism surrounding China’s stimulus measures.

Bloomberg News and Reuters reported earlier that China is considering injecting capital worth CNY1 trillion ($142 billion) into top state-owned banks, in a further effort to shore up the economy.

Additionally, China’s Politburo, the country’s top leadership, held a meeting on Thursday and affirmed that they will lower the Reserve Requirement Ratio (RRR) and implement a forceful interest rate cut. The recovery in risk sentiment drives Asian indices closer to two-year highs, with the US S&P 500 futures, the risk barometer, rising 0.60% so far.

Most G10 currencies benefited from risk reset and the faltering US Dollar rebound. The higher-yielding Australian Dollar is seen as the best performer, driving AUD/USD back toward the highest level since February 2023. The Aussie capitalizes on fresh Chinese stimulus measures, last seen trading at 0.6860.

USD/JPY rebounded firmly before entering a consolidation just below 145.00. The pair remains underpinned by the risk-on market mood, which weighs on the safe-haven Japanese Yen. The local currency ignored the Bank of Japan’s (BoJ) July meeting Minutes.  

USD/CAD is posting small losses and retreats toward 1.3450, despite the latest leg down in Oil price. The black gold plunged 2% on Wednesday, as supply concerns from the shutdown of the Libyan oilfield eased. WTI is currently shedding 1.45% on the day to trade near $69.

USD/CHF is trading sideways at around 0.8500, awaiting the Swiss National Bank’s (SNB) monetary policy assessment for fresh cues.

GBP/USD is holding the bounce near 1.3350, supported by a better market mood and monetary policy divergence between the Fed and the Bank of England. BoE policymaker Megan Greene said on Wednesday that a “cautious, steady-as-she-goes approach to monetary policy easing is appropriate.”

EUR/USD is testing 1.1150 once again, attempting a tepid recovery in early Europe in the lead-up to speeches from European Central Bank (ECB) President Christine Lagarde and Fed Chair Jerome Powell. Lagarde is due to deliver opening remarks at the European Systemic Risk Board Annual Conference at 13:30 GMT.

Gold price is trading listlessly just below the record high of $2,671. Overbought conditions on Gold’s daily chart point to a potential corrective decline in the near term.