The US dollar strengthened to its highest level since May 2025 amid renewed Fed rate hike bets, while the BoE and SNB kept policy rates unchanged. UK employment data and SNB's cautious stance on FX intervention shaped market sentiment.
Dollar Index Surges on Fed Rate Hike Expectations
The US dollar index (DXY) rose to its highest level since May 2025, buoyed by increased expectations of Federal Reserve rate hikes following the central bank's hawkish dot plot projections. The greenback's rally extended gains against major peers, with markets pricing in a 58% chance of a September rate increase.
BoE Maintains Bank Rate at 3.75% Amid Steady Outlook
The Bank of England (BoE) left its bank rate unchanged at 3.75% during its June meeting, in line with market expectations. The Monetary Policy Committee (MPC) reiterated its readiness to act as needed to meet the 2% inflation target, though no significant shifts in forward guidance were announced. Markets maintained pricing for 35 basis points of tightening by year-end.
SNB Signals Caution on FX Intervention
The Swiss National Bank (SNB) kept its key policy rate at 0.00%, as widely anticipated. However, the addition of "if necessary" to its statement on FX market readiness sparked speculation. SNB Chairman Thomas Jordan declined to elaborate on the wording change, leading markets to interpret the move as dovish. The Swiss franc initially held steady but weakened slightly post-meeting.
UK Employment Data Supports Rate Hike Bets
The UK's April ILO unemployment rate fell to 4.9%, below the 5.0% forecast, while wage growth exceeded expectations. The data reinforced modest upward pressure on BoE rate hike probabilities but did not significantly alter the broader policy outlook.
Gold and Bitcoin React to Dollar Strength
Gold prices closed the gap after the Fed's hawkish signal, though tightening bias capped further upside. Bitcoin faced resistance near $61,775, with traders eyeing key technical levels amid mixed macro sentiment.
Implications for Traders
The DXY's rally underscores the dollar's dominance amid diverging global monetary policies. Traders should monitor upcoming US inflation data and Fed communications for cues on rate path adjustments. Meanwhile, the SNB's cautious tone highlights potential volatility in EURCHF and USDCHF pairs. Risk sentiment remains tilted toward caution, with focus on central bank divergence and growth dynamics.
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