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This week: Fed hiked rates - first time since July 2023; BoJ triggered "dovish" hike but offered mixed outlook; BoE held steady but cited willingness to hike
Reminder: A currency tends to strengthen at the thought of its interest rates moving higher
Post Fed/BoE: GBPUSD perfectly respected 1.337 downside target set on Mon, Sept 14th
Post BoJ: USDJPY smashed through upside target before ending the week almost-perfectly at our 156.90 upside target set on Mon, Sept 14th
Fed rate hike sank Gold to 6-week low; precious metal then rebounded as oil prices fell
ICYMI: 3 of the biggest central banks in the world were in action this week.
Federal Reserve hiked US rates for first time since July 2023!
Last Wednesday, September 16th @ 6:00 PM UTC, the US Federal Reserve a.k.a. the Fed raised its benchmark rates by 25 basis points to 3.75% - 4.00%.
Furthermore, markets now fully expect 3 more rate hikes over the next 12 months (through September 2027).
Reminder: A currency tends to strengthen at the thought of its interest rates moving higher
Hence, no surprise that the US dollar strengthened against all G10 and Asian currencies so far this week, except for the Chinese Yuan.
Bank of England (BoE) left UK rates unchanged ... for now
On Thursday, September 17th @ 11:00 AM UTC, the Bank of England (BoE) left its bank rate unchanged at 3.75%.
This decision left the BoE as an outlier among other major central banks, following hikes by the European Central Bank (ECB) last week, then the Fed and the Bank of Japan this week.
Even though BoE Governor Andrew Bailey hinted that the UK central bank may be ready to hike, it wasn't enough to prevent the British Pound (GBP) from weakening against most of its G10 peers for the week.
Still, markets still fully expect the BoE to hike 4 times by mid-2027.
Bank of Japan (BoJ) triggered "dovish" hike
Then on Friday, September 18th circa 3:00 AM UTC, the Bank of Japan (BoJ) voted 7-2 to raise its target rate by 25 basis points to 1.25%.
Markets had a tough time deciphering BoJ Governor Kazuo Ueda's comments, sending the Yen on a roller-coaster before declining sharply.
At the time of writing, markets predict a near-80% chance that the BoJ will hike 3 more times by July 2027.
Although this week's rate actions by the central banks in the US (hike), UK (hold), and Japan (hike) were in line with market expectations, it was the signals about what they might each do in the months ahead that triggered big market moves.
After all, markets are forward-looking in nature i.e. today's prices reflect tomorrow's expectations.
How did Bybit Learn's "3 Assets to Watch" perform this week?
1) GBPUSD respects downside target set since Mon, Sept 14th
Following the Fed's hike, GBPUSD quickly fell and met the 1.3370 downside target we'd drawn since the start of the week - prior to the Fed and BoE rate decisions.
Here's the GBPUSD chart published on Mon, Sept 14th:
Here's the chart at the time of writing on Fri, Sept 18th - note that the downside target is still being "respected" = markets aren't allowing prices to stray far from the target.
Such price action vindicates our downside scenario for GBPUSD that we wrote on Monday, September 14th:
DOWNSIDE - GBPUSD could break below its 200-day SMA and eventually sink to 1.3370 region if
Fed hikes this week and signals more to come, driving broad USD gains
BoE holds with a cautious tone, widening the policy divergence between the UK and US rates outlooks
2) USDJPY smashed past, before respecting our upside target!
This was a week to behold for USDJPY "bulls" (those hoping prices will move higher).
Among all major G10 FX pairs, USDJPY was the biggest gainer for the week, climbing 2.08% i.e. the Japanese Yen was the biggest loser among G10 currencies last week (Sept 14-18).
Here's the USDJPY chart published on Mon, Sept 14th:
Despite both the US and Japan central banks raising their respective rates this week:
the Fed's "hawkish" tone (signaling more hikes to come)
coupled with the BoJ's "dovish" tone (reluctance to commit to more hikes)
… sent USDJPY rebounding and soaring away from its lowest levels since February 2026!
More importantly, USDJPY then settled back down to end the trading week just a hair (30 pips) below our 156.90 upside target!
NOTE: 156.90 upside target drawn since Monday, September 14th (compare chart above vs. chart below):
Such price action duly respected our upside scenario for USDJPY that we wrote on Monday, September 14th:
UPSIDE - USDJPY could rebound toward the 156.90 area if:
Fed hikes and signals further tightening, overwhelming the BOJ move
BOJ hikes +25bps but signals a cautious, data-dependent pause
READ MORE:
published Sept 8th: Here's why the Japanese Yen is soaring!
published Aug 2nd: USDJPY hits our upside target before historic intervention.
3) Gold still in play
Here's the XAUUSD chart published on Mon, Sept 14th, with gold then testing support around its 100-day simple moving average (SMA):
The Fed's hawkish signals initially sent spot gold faltering to 6-week low!
However, once markets digested the Fed's latest moves, bullion then rebounded strongly as oil prices fell, suggesting that inflation risks may subside (helped along by more Fed rate hikes in the months ahead).
At the time of writing, gold has erased its declines from earlier in the week to now posting a week-to-date gain of 0.85%.
If gold holds on to this weekly gain, it would end a 3-week losing streak.
DISCLAIMER: This article is provided for general information purposes only and does not constitute investment advice, nor an offer or solicitation to buy or sell any financial instruments or digital assets. Past performance is not indicative of future results. Your ability to access or use any products or services mentioned may be subject to the laws and regulatory requirements of your jurisdiction.
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