Markets eagerly await the rate decision of the SNB, Powell and Lagarde

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

After witnessing a solid recovery in US trading on Wednesday, the US dollar (USD) is halting its recovery and remains in a consolidating mode heading into the European open on Thursday.

Traders are turning cautious and refraining from placing new bets on the USD ahead of the release of US Federal Reserve (Fed) Chairman Jerome Powell’s pre-recorded speech. A host of other Fed officials are set to make scheduled appearances with Chairman Powell, with their respective speeches scheduled to take place from 13:10 GMT.

The Fed’s comment will be key to gauge the size of the next interest rate cut in November. Markets are already pricing in a 61 percent chance of a 50 basis point (bps) rate cut, according to CME Group’s Fed WatchTool.

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

Aside from Fedspeak, investors will also look to medium-impact U.S. durable goods orders and jobless claims data for new trade directives.

The US dollar is also stalling its earlier gains as risk sentiment turns positive on renewed optimism around China’s stimulus measures.

Bloomberg News and Reuters earlier reported that China is considering injecting CNY 1 trillion ($142 billion) of capital into top state-owned banks in a further effort to prop up the economy.

In addition, China’s Politburo, the country’s top leadership, held a meeting on Thursday and said it will lower the reserve requirement ratio (RRR) and implement a forced interest rate cut. The recovery in risk sentiment is driving Asian indices near two-year highs, with US S&P 500 futures, the risk barometer, up 0.60% year to date.

Most G10 currencies benefited from the risk reset and the US dollar’s shaky recovery. The higher-yielding Aussie is seen as the top performer, leading AUD/USD back to its highest level since February 2023. The Aussie is capitalizing on fresh Chinese stimulus measures, last seen at 0.6860.

USD/JPY it rebounded strongly before entering a consolidation just below 145.00. The pair remains supported by the risk-on mood in the market, which weighs on the safe Japanese yen. The local currency ignored the minutes of the July Bank of Japan (BoJ) meeting.

USD/CAD shows small losses and pulls back towards 1.3450 despite the last leg down from Oil price. Black gold fell 2 percent on Wednesday as supply concerns over a Libyan oil field shutdown eased. WTI is currently down 1.45% on the day to trade near $69.

USD/CHF it is trading sideways at around 0.8500, pending the Swiss National Bank’s (SNB) monetary policy review for further cues.

GBP/USD holds the rise near 1.3350, supported by better market sentiment and monetary policy divergence between the Fed and the Bank of England. BoE policymaker Megan Greene said on Wednesday that “a cautious, steady approach to easing monetary policy is appropriate.”

EUR/USD retesting 1.1150, attempting a tepid recovery early in Europe ahead of speeches by 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’s annual conference at 13:30 GMT.

Gold the price is trading smoothly just below the all-time high of $2,671. Overbought conditions on gold’s daily chart indicate a potential near-term corrective decline.