Dollar edges back from the top; Good earnings ahead of BOE meeting With Investing.com
Investing.com – The U.S. dollar fell slightly on Thursday, but remained near a two-year high after the Federal Reserve signaled a gradual rate cut through 2025, while sterling rose ahead of the Bank of England’s latest policy meeting.
At 05:05 ET (10:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 107.670, after rising to a two-year high on Wednesday.
The dollar is falling from a two-year high
The dollar rose on Wednesday after reducing its view of an interest rate cut next year, following a cut in expectations.
US central bank policymakers now only see an additional 50 basis points of expansion in 2025, instead of the 100 bps shown in previous forecasts in September.
“We think this hawkish revision of the Fed’s communications will lay the groundwork for dollar strengthening in the new year,” ING analysts said in a note.
“Markets are expecting a freeze in January and the 11bp price will be in March. If the dot plot does indeed serve as a measure of rate expectations over the next three months, the bar for surprise data to seriously threaten large dollar gains is set high.”
Economic data centers around the release of the third quarter, which is expected to show that annual growth fell to 2.8% in the quarter, down from 3.0% in the previous quarter.
Sterling jumps ahead of BOE meeting
In Europe, it traded 0.7% higher at 1.2662, off Wednesday’s three-week low ahead of a Bank of England policy meeting later in the session.
Tax rates are widely expected to remain unchanged, continuing their cautious approach to easing monetary policy as inflation concerns remain.
“The focus will be on any changes to the language going forward and the split vote (we expect an 8-1 hold). There is no press conference scheduled for this meeting,” said ING.
“Our view is that the BoE will try to make this announcement less of an event, giving some cautionary signs to improve the road but also highlighting its commitment to inflation and wages.”
rose 0.6% to 1.0415, rebounding after its biggest drop of 1.3% in the previous session.
Inflation cut its key rate last week for the fourth time this year, and is likely to cut interest rates again in 2025 if inflation worries subside.
“If incoming data continues to confirm our fundamentals, the direction of travel is clear and we expect to lower interest rates,” ECB President Christine Lagarde said in a speech earlier this week.
Inflation in the eurozone was 2.3% last month and the ECB expects it to stabilize at its 2% target next year.
Yen weakens after BOJ keeps rates unchanged
In Asia, it rose 1.5% to 157.13, breaking above 155 for the first time since late November, after prices were kept firm and cautiously flagged for 2025.
The BOJ’s decision disappointed some traders who had expected a hike in December. The central bank has raised interest rates twice this year in a historic move away from a more relaxed policy.
rose 0.3% to 7.3078, with the pair climbing to its highest level since September 2023. The yuan was weighed down by the prospect of loosening financial conditions in China, as the government signaled more measures to stimulate growth.
