The US dollar stabilized on Thursday amid mounting concerns about a wider conflict in the Middle East while traders assess latest decisions by global central banks, including a surprise rate cut by the Norwegian Central Bank, keeping traders cautious.
A spike in geopolitical tensions boosted the dollar, which recently reclaimed its status as a safe haven, with both Iran and Israel carrying out air strikes on Thursday with the conflict entering its seventh week.
Concerns are mounting about a potential US entry as President Trump keeps the world guessing on whether he’ll enter the fray or not.
The Fed Holds Rates
The Federal Open Market Committee voted to hold interest rates unchanged at below 4.5% as expected by analysts.
The FOMC expects two 0.25% interest rate cuts by the end of 2025, while reducing expected future cuts in both 2026 and 2027 by once each.
The statement showed persistent uncertainty among Fed officials on the future of interest rates, but overall, the Fed expects rates to reach 3.4% by 2027.
The Fed has adjusted GDP growth in 2025 to 1.4%, while raising inflation forecasts to 3%.
Swiss Franc Rises, Norwegian Krone Drops
The Swiss franc rose against the US dollar after an expected decision by the Swiss National Bank to cut interest rates, but the surprise came from the Norwegian central bank, which cut interest rates unexpectedly by 25 basis points.
Both the dollar and the euro rose against the Krone by 0.7% and 0.6% respectively, but it remains one of the best performing currencies this year against the dollar with an 11% profit so far.
Forex Performance Worldwide
The euro fell 0.1% to $1.147, while the yen reached 145.28 against the greenback, as the Swiss franc rose after the central bank avoided a deeper 0.5% rate cut.
The dollar index was stable at 98.9, up 0.8% so far this week, the best such performance since late February.
Wall Street Closed
Liquidity could be impacted today due to the US banking holiday of Juneteenth.
Powell Talks about Inflation
Fed Chair Powell said the impact of tariffs will become clearer during the summer, and as long as growth remains strong and inflation down, the proper decision would be to maintain current monetary policies.
According to the Fedwatch tool, the odds of a Fed July 0.25% rate cut rose to 17%, while the odds of such a cut in September rose to 66%.
