USD Firms Broadly as Fed Delivers First Hike Since 2023; BoE Holds

Risk sentiment improved as markets digested the Federal Reserve's first interest rate hike since 2023, a move that removed a significant layer of uncertainty around the US monetary policy regime. The clarity delivered by the Fed, combined with the Bank of England's decision to pause its own rate cycle, encouraged a broad-based rally across global equities and steadied currency markets. For FX, the hike reinforces the dollar's yield advantage across the majors, keeping EUR/USD and GBP/USD on the defensive while underpinning USD/JPY despite the Bank of Japan's own tightening path. The BoE hold leaves sterling dependent on incoming UK inflation and labour data, with GBP/USD likely to track relative rate expectations rather than domestic catalysts in the near term. Traders should note that post-decision relief rallies often fade once positioning normalises, and that the Fed's forward guidance on the pace of further tightening will matter more than the hike itself. Watch dollar index momentum and 2-year yield spreads for confirmation of durable USD strength.