Market Drivers – US Session: The US Dollar Stages a Comeback as Markets Digest Fed’s Rate Stance

The US Dollar, often referred to as the Greenback, made a notable turnaround on Thursday, March 20, 2025, building on its recovery following the Federal Open Market Committee (FOMC) meeting earlier in the week. Climbing to its highest levels in days, the Dollar surged as investors recalibrated their expectations after the Federal Reserve signaled no rush to cut interest rates. This shift in sentiment propelled the US Dollar Index (DXY) past the 104.00 mark, despite a continued softening in US yields across various maturities. As the week draws to a close, all eyes are on a speech from Fed official John Williams, the only significant US event scheduled for Friday, March 21.

The Dollar’s strength rippled through global currency markets, pressuring major pairs. The EUR/USD took a hit, sliding to multi-day lows between 1.0810 and 1.0820 as the Greenback regained its footing. In Europe, attention will turn to a speech from Bundesbank’s Sabine Mauderer, which could offer further insight into the Eurozone’s monetary outlook. Meanwhile, the GBP/USD faced renewed selling pressure, dipping to the 1.2940 zone amid a broader pullback in risk-sensitive assets. UK investors will be watching Friday’s releases of the GfK Consumer Confidence gauge and Public Sector Net Borrowing data for clues on the British economy’s health.

Across the Pacific, the USD/JPY pair reversed Wednesday’s decline, edging up toward 149.00. Japan’s upcoming inflation rate data, alongside foreign bond investment figures, will be key focal points for FX traders on Friday. Down under, the AUD/USD lost momentum, retreating to weekly lows near 0.6270 as the Dollar’s resurgence overshadowed other factors. Australia’s next significant release, the Monthly CPI Indicator, isn’t due until March 26, leaving the Aussie vulnerable to further Greenback-driven swings in the meantime.

Commodities also felt the Dollar’s influence. West Texas Intermediate (WTI) crude oil prices remained volatile, slipping back below $67.00 per barrel as the stronger Dollar weighed on demand. Gold, however, hit a record high near $3,060 per troy ounce before pulling back slightly, caught between its safe-haven appeal and the Dollar’s rally. Silver didn’t fare as well, tumbling to a five-day low around $33.00 per ounce as the Greenback’s dominance took its toll.

As markets head into Friday, the interplay between the Fed’s cautious stance and the Dollar’s renewed vigor continues to shape the global financial landscape. With key data and central bank commentary on the horizon, investors remain on alert for the next moves in this dynamic environment.