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📊 Japanese yen weakens despite safe-haven inflows

The Japanese yen (JPY) weakened against the U.S. dollar (USD) on Thursday, approaching a three-week low. USDJPY rose as the U.S. dollar (USD) gained strength following the Federal Reserve's (Fed) latest policy update.

👉 Possible effects for traders
The Fed held rates steady but maintained a data-dependent stance, signalling that monetary policy decisions would depend on economic conditions. Investors interpreted the central bank's cautious tone and emphasis on inflation risks—particularly those from U.S. President Donald Trump's tariffs—as supportive of the U.S. dollar, which, in turn, weighed heavily on the yen. Safe-haven dynamics also played a significant role in currency flows. Despite escalating geopolitical tensions in the Middle East, the U.S. dollar outperformed the yen as the preferred safe-haven asset. This shift suggests that investors are prioritising yield differentials and USD relative strength over traditional safe-haven behaviour, particularly as the greenback benefits from higher interest rate expectations and stronger economic resilience.

Meanwhile, the Bank of Japan (BoJ) left its monetary policy unchanged on Tuesday, reiterating its commitment to a gradual and cautious normalisation path. BoJ Governor Kazuo Ueda emphasised that while the bank remains vigilant regarding domestic inflation and external risks, any potential rate hikes would be modest and depend on sustained price pressures. This divergence in policy outlook between the Fed and the BoJ has widened yield differentials, further contributing to the yen's weakness against the U.S. dollar.

USDJPY fell slightly during Asian and early European trading sessions. Today's macroeconomic calendar is relatively uneventful, so the probability of significant price movements is low. Traders should watch the critically important 145.500 level, as a break above it could trigger a major upward movement.

📊 Euro consolidates after Fed interest rate decision

The euro (EUR) remained unchanged on Wednesday, consolidating near 1.15000, as markets digested the latest Federal Reserve (Fed) interest rate decision and economic forecasts.

👉 Possible effects for traders
As expected, the Fed held interest rates steady but emphasised a cautious, data-driven approach. This stance supported the U.S. dollar, particularly as investors reassessed the likelihood of near-term monetary easing in light of persistent inflationary pressures. Fed Chair Jerome Powell acknowledged the risk of higher inflation in the coming months, attributing part of the potential increase to U.S. President Donald Trump's trade tariff policies. These measures could increase import costs, complicating the Fed's task of balancing inflation control and economic support. While Powell refrained from committing to a specific rate path, his remarks reinforced the view that the Fed will remain flexible in response to evolving economic data.

In a notable shift, the central bank downgraded its U.S. growth outlook and projected two 25-basis-point rate cuts in 2025, catching markets off guard. Many traders had anticipated only one cut, prompting a swift repricing across interest-rate futures. Despite the dovish forward guidance, the U.S. dollar remained resilient, buoyed by its relative yield advantage and safe-haven appeal amid geopolitical uncertainty.

EURUSD rose during Asian and early European trading sessions. Today's formal macroeconomic calendar is relatively uneventful, so volatility is likely to be low. Still, investors should closely monitor potential U.S. involvement in the Middle East conflict. Some reports indicate that Washington is preparing for a possible military strike on Iran, raising fears of broader regional escalation. Key levels to watch are support at 1.14000 and resistance at 1.15000.

📊 Dovish rhetoric puts downward pressure on gold

Gold prices (XAU) fell towards $3,370 on Wednesday after Federal Reserve (Fed) Chairman Jerome Powell made dovish statements.

👉 Possible effects for traders
As expected, the Federal Open Market Committee (FOMC) left the benchmark fed funds rate unchanged at 4.25–4.5% while acknowledging that economic uncertainty has somewhat eased but remains elevated. Notably, the committee dropped previous remarks of a rising risk of both higher unemployment and inflation, signalling a more balanced, though still cautious, policy stance. The Fed Chair warned that inflation is expected to rise significantly in the coming months, largely due to the recent increases in trade tariffs. He noted trade tariffs could have more persistent effects on price levels than previously anticipated.

In its updated projections, the FOMC revised its 2025 U.S. GDP growth estimate towards 1.4%, from 1.7% in March, reflecting growing concerns about economic momentum. At the same time, the central bank raised its 2025 core inflation forecast towards 3.1% from 2.8%, underlining the impact of external cost pressures, including trade-related factors. The Fed's dot plot maintained its outlook for two rate cuts by the end of 2025, with a median fed funds rate projection of 3.875%. While the Fed remains open to easing, it proceeds cautiously in the face of evolving inflation dynamics.

XAUUSD continued to fall during Asian and early European trading sessions. Today's macroeconomic calendar is rather uneventful, but traders should monitor any developments around trade tariffs. Key levels to watch for XAUUSD are support at $3,360 and resistance at $3,400.

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