Forex Today: Dollar retreats after Fed-inspired upsurge, eyes on central bank speakers

Here is what you need to know on Thursday, April 7: 

The dollar rally continued late Wednesday and the US Dollar Index (DXY), which tracks the greenback's performance against a basket of six major currencies, reached its highest level in nearly two years at 99.77. Ahead of the US weekly Initial Jobless Claims data and speeches of FOMC policymakers, the DXY is staging a downward correction. The market mood stays upbeat early Thursday with US stock futures indexes posting modest gains. The European economic docket will feature the European Central Bank's (ECB) Meeting Accounts and February Retail Sales data.

The minutes of the Federal Reserve's March policy meeting revealed on Wednesday that many participants noted that they would have preferred a 50 basis point increase in the target range for the federal funds rate at that meeting. The publication also confirmed that the Fed is planning to start reducing the balance sheet after the May meeting. With the initial market reaction to the hawkish FOMC statement, the 10-year US Treasury bond yield climbed to its strongest level since April 2019 at 2.66% before retreating below 2.6% early Thursday.

Meanwhile, the UK announced that it will freeze the assets of Sberbank and ban Russian coal imports. Additionally, both the US and the UK said they will ban outward investments in Russia.

EUR/USD fell to its weakest level in a month at 1.0874 and closed the fifth straight day in negative territory on Wednesday. The pair was last seen posting small recovery gains near 1.0900.

GBP/USD dropped below 1.3050 on Wednesday but managed to erase a small portion of its weekly losses early Thursday. As of writing, the pair was up nearly 0.3% on the day at 1.3100.

Despite the surging US T-bond yields, USD/JPY struggled to gain traction. The pair continues to trade in a relatively tight channel below 124.00 in the European morning. Commenting on the currency valuations, "the merits of a weak yen on Japan’s economy outweigh the demerits," Bank of Japan (BOJ) policy board member Asahi Noguchi said on Thursday.

Gold stayed relatively resilient amid risk aversion on Wednesday and ended up closing the day virtually unchanged above $1,920. XAU/USD is moving sideways below $1,930.

Bitcoin suffered heavy losses on the hawkish Fed tone and lost more than 5% on Wednesday. BTC/USD is fluctuating below $44,000 early Thursday. Ethereum is already down nearly 10% this week but stays above $3,000.