**US Dollar Surges as Fed Signals Further Tightening: Focus on USD/JPY and AUD/USD**
*Based on the original article by Matt Weller, FOREX.com Analyst, and expanded with additional context.*
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The US dollar soared to lead major currencies following the Federal Open Market Committee’s (FOMC) most recent meeting, which delivered a more hawkish outlook than many market participants had anticipated. The outcome put renewed pressure on currency pairs like USD/JPY and AUD/USD, driving volatility across global foreign exchange markets. In this comprehensive article, we examine the catalysts behind the greenback’s ascendency, dive deep into the latest FOMC developments, and explore the technical setups and market sentiment driving USD/JPY and AUD/USD towards critical turning points.
## FOMC Meeting Recap: A Hawkish Surprise
On June 12, 2024, the FOMC opted to hold the federal funds rate at its highest level in more than twenty years, continuing its fight against persistent inflation. The real surprise for investors, however, came in the form of the “dot plot,” which tracks individual policymakers’ rate projections. Contrary to expectations of two or even three rate cuts this year, the median projection suggested just one rate cut in 2024.
**Key highlights from the June meeting:**
– **Federal Funds Rate Unchanged:** The FOMC left the key policy rate at a 23-year high (between 5.25-5.50 percent), maintaining its restrictive stance.
– **Inflation Worries Persist:** Despite encouraging progress on headline inflation, core measures remain sticky, particularly within services.
– **Dot Plot Adjustments:** The FOMC’s median forecast now reflects only one rate cut by year-end. This is down from earlier projections of at least two cuts and has reset market expectations.
– **Jerome Powell’s Tone:** Chair Powell acknowledged signs of economic slowing but emphasized that data would dictate future policy. His comments reinforced the message that the fight against inflation is not finished.
## Market Reactions: Dollar Dominance and Shifting Expectations
The post-meeting reaction in financial markets was swift. The US dollar index (DXY), which tracks the greenback against a basket of major currencies, surged as traders digested fading hopes of aggressive Fed easing in 2024.
**Major outcomes across asset classes included:**
– **US Dollar (DXY):** Climbed to multi-week highs, nearing significant resistance levels last seen earlier in the year.
– **Treasury Yields:** Short-term yields, especially on the 2-year rate, rebounded as the prospects for rate cuts waned.
– **Stocks:** Major US equity indices wavered, with growth and technology shares particularly sensitive to the outlook for higher rates.
– **Global Currencies:** Currencies most sensitive to interest rate differentials, such as the Japanese yen and Australian dollar, experienced sharp moves.
## The Path Forward: What Are Markets Watching?
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