Forex Today: Fed drives dollar higher, gold and stocks lower, BOE, jobless claims eyed

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Here is what you need to know on Thursday, September 17:

The Federal Reserve’s reluctance to signal more stimulus despite cautious forecasts is weighing on stock markets and boosting the safe-haven dollar. Weekly jobless claims and the Bank of England’s decision stand out on Thursday.

Fed: Jerome Powell, Chairman of the Federal Reserve, stressed that the outlook is uncertain yet said that the current level of bond-buying is appropriate. The Fed did not surprise markets by hinting that interest rates will likely remain at zero through 2023. 

See: 

  • Fed Quick: No news is good news for the dollar, at least until Congress moves
  • The Fed in September: Quicksand at the zero bound

Powell also indicated that additional fiscal stimulus will likely be needed, seemingly passing the ball to lawmakers’ court. According to reports, Democrats and Republicans are getting closer to a deal on an injection of around $1.5 trillion.

The new impetus comes after retail sales disappointed with a meager increase of 0.6% in August. The Control Group dropped by 0.1% and all the recent figures came on top of downward revisions. The shortfall seems related to the lapse of government programs at the end of July. 

See Retail Sales Analysis: Miserable figures good for gold as fiscal help could come sooner

Weekly jobless claims (see preview) are set to show a small drop for the week ending on September 11, when Non-Farm Payrolls surveys are held. The Philadelphia Fed Manufacturing Index, and housing figures are also of interes.

President Donald Trump contradidcted his own top health officials by claiming a vaccine is coming shortly. Robert Redfield, the head of the Center for Disease Control, and leading epidemiologist Anthony Fauci foresee broadly available immunization to come only in mid-2021. 

Brexit: Prime Minister Boris Johnson has ceded ground to “rebels” in his Conservative Party and allowed for greater parliamentary oversight over the controversial Internal Markets bill. The legislation knowingly violates the Brexit accord Johnson signed with the EU last year. The pound advanced in response.

The focus shifts to the Bank of England, which is widely expected leave its policy unchanged. Investors will watch the BOE’s guidance amid a stop-start economy. Local lockdowns are enacted in various places in Britain and new restrictions may be added. 

See BOE Preview: Fast recovery or trio of troubles? Bank’s tone to set pound’s direction

The Bank of Japan left its interest rate unchanged at -0.1% as expected, in its first decision after Yoshihide Suga replaced Shinzo Abe as prime minister. The Tokyo-based institution upgraded its forecasts. USD/JPY is trading around 105, rising amid dollar strength and not falling on safe-haven flows.

AUD/USD is trading below 0.73 amid the risk-off mood. However, Australia reported an increase of 111,000 jobs in August, far above expectations and boosting the Aussie. 

NZD/USD is trading around 0.67, down on the greenback’s strength and as second-quarter Gross Domestic Product dropped by 12.2%, within broad expectations.

OPEC+ members are set to leave oil production goals unchanged. WTI is trading closer to $40. While the damp market mood is weighing on petrol prices, Hurricane Sally and other brewing storms are limiting output and boosting oil prices.

Cryptocurrencies are holding onto recent gains, with Bitcoin trading around $11,000.

More: 2020 Elections: How stocks, gold, dollar could move in four scenarios, nightmare one included

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