Forex Today: ECB and BoE up next as USD consolidates Fed-inspired gains

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.38%	-0.20%	-0.11%	0.05%	-0.64%	-0.40%	0.20%
EUR	0.38%		0.20%	0.20%	0.42%	-0.26%	-0.04%	0.57%
GBP	0.20%	-0.20%		0.13%	0.22%	-0.46%	-0.23%	0.43%
JPY	0.11%	-0.20%	-0.13%		0.18%	-0.52%	-0.27%	0.32%
CAD	-0.05%	-0.42%	-0.22%	-0.18%		-0.72%	-0.44%	0.15%
AUD	0.64%	0.26%	0.46%	0.52%	0.72%		0.22%	0.83%
NZD	0.40%	0.04%	0.23%	0.27%	0.44%	-0.22%		0.58%
CHF	-0.20%	-0.57%	-0.43%	-0.32%	-0.15%	-0.83%	-0.58%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The Federal Reserve (Fed) left the policy rate unchanged at the range of 3.5%-3.75% following the March meeting, as widely anticipated. The Summary of Economic Projections (SEP), published alongside the policy statement, showed that officials' projections imply a 25 basis-points (bps) rate cut in 2026 and another 25 bps cut in 2027, unchanged from the December SEP. While seven policymakers pencilled in no rate cuts this year, one projected a rate hike next year. Moreover, end-2026 Personal Consumption Expenditures (PCE) inflation is now expected at 2.7%, compared to 2.4% in December's SEO, while the core PCE inflation is also seen at 2.7%.

In the post-meeting press conference, Fed Chair Jerome Powell explained that they expect higher energy prices to push inflation up in the near term and added that rate cuts will not follow if the inflation progress stalls.

Following a two-day decline, the USD Index gained traction in the American session on Wednesday and rose nearly 0.7% on the day. Early Thursday, the USD Index fluctuates in a tight channel above 100.00.

The Bank of Japan (BoJ) announced on Thursday that it decided to hold the short-term interest rate steady at 0.75% after concluding its two-day monetary policy review meeting. One member preferred a 25 bps rate hike, arguing that the price stability has been more or less achieved and risks to prices in Japan are skewed to the upside due to the second-round effects of price rise stemming from overseas developments. In the press conference, BoJ Governor Kazuo Ueda noted that the pace of inflation increase is expected to face upward pressure from higher oil prices and said that real interest rates are at significantly low levels. After touching its highest level since July 2024 near 160.00 late Wednesday, USD/JPY corrects lower early Thursday and trades at around 159.50.

The data from Australia showed earlier in the day that Employment Change in February was up 48.9K, compared to the market expectation of 20.3K. However, the Unemployment Rate in this period rose to 4.3% from 4.1%. After losing more than 1% on Wednesday, AUD/USD recovers modestly and trades slightly below 0.7050 in the European morning on Thursday.

The UK's Office for National Statistics reported that the ILO Unemployment Rate remained unchanged at 5.2% in the three months to January. In this period, annual wage inflation, as measured by the change in the Average Earnings Excluding Bonus, softened to 3.8% from 4.1%. GBP/USD showed no immediate reaction to the employment data and was last seen moving sideways below 1.3300. The BoE is widely expected to maintain its bank rate at 3.75%.

EUR/USD holds steady above 1.1450 after losing nearly 0.8% on Wednesday. Investors will pay close attention to comments from ECB President Christine Lagarde as the ECB is anticipated to keep the key rates unchanged.

Gold broke below $5,000 and lost nearly 4% on Wednesday, pressured by the renewed USD strength. XAU/USD continues to push lower in the European morning on Thursday and trades at its lowest level since early February below $4,800.

Crude oil prices correct lower after rising sharply on Wednesday. The barrel of West Texas Intermediate (WTI), which gained nearly 4% yesterday, was last seen trading near $95.50, down about 3.5% on the day.

Central banks FAQs

What does a central bank do?

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

What does a central bank do when inflation undershoots or overshoots its projected target?

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

Who decides on monetary policy and interest rates?

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Is there a president or head of a central bank?

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.