Investing.com – The US dollar edged higher on Thursday, trading in a tight range ahead of next week’s all-important US inflation data, while the pound fell ahead of the Bank of England’s policy-setting meeting.
At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 105.605, recovering from last week’s low.
Narrow trading range ahead of US CPI
The dollar has been steady this week, following last week’s sharp losses, as some Fed officials pushed back against the idea that rate cuts this year are a certainty.
The head of the Minneapolis Fed suggested on Tuesday that persistent inflation and a robust economy could convince the US central bank to leave interest rates unchanged for the rest of this year.
The president of the Fed Bank of Boston continued that theme Wednesday, saying the U.S. economy needs to cool to get inflation back to target.
There are more speakers on both Thursdays and Fridays, as well as weekly data.
However, trading margins are likely to be tight ahead of next week’s US rate in April, and in particular the , where traders will be watching for signs that inflation is continuing its downward trend towards the Fed’s 2% target rate has resumed.
Sterling slides ahead at BOE meeting
In Europe, the price traded 0.2% lower to 1.2475, ahead of the latest interest rate meeting.
The British central bank is not expected to raise interest rates later Thursday, so the big question is whether officials indicate a cut will come in June, while the European Central Bank has already indicated this will happen.
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A cut is fully priced in for August and last week sterling short positions rose to their largest since January 2023. So sterling could be volatile if post-meeting expectations don’t match market expectations.
In Europe, trading was trading 0.1% lower at 1.0732, with trading largely unchanged given the light data calendar.
“It is difficult to see the EUR/USD breaking far from 1.0750 unless the BoE is demonstrably dovish and GBP/USD drags the EUR/USD down with it,” analysts at ING said in a note.
The yen is falling despite rumors of interest rate hikes
In Asia, yields rose 0.3% to 155.87, with the yen remaining weak despite hawkish views from Bank of Japan members.
The summary of the BOJ’s opinions released earlier Thursday showed that board members were overwhelmingly hawkish at their policy meeting in April, with many calling for steady rate hikes.
BOJ Governor Kazuo Ueda also warned that any inflationary pressures arising from yen weakness could lead to monetary tightening by the central bank.
That said, the yen has still resumed its decline even after a few periods of suspected intervention.
rose 0.1% to 7.2260, with the yuan struggling to hold on to earlier gains after data showed Chinese growth grew substantially stronger than expected in April, indicating some strength in domestic demand.
