May 9 2024: The U.S. dollar saw a slight uptick on Thursday, trading within a narrow range as investors awaited crucial U.S. inflation data next week. Meanwhile, the pound slipped ahead of the Bank of England’s policy-setting meeting.
As of 04:35 ET (08:35 GMT), the Dollar Index, which measures the dollar against a basket of major currencies, rose by 0.2% to 105.605. This rebound follows last week’s one-month low, indicating a stabilizing trend for the greenback.
Stable Trading Amidst Awaited US CPI
The dollar has found stability this week after recent losses, fueled by comments from several Federal Reserve officials indicating a reluctance towards imminent rate cuts.
Minneapolis Fed President Neel Kashkari’s remarks on Tuesday suggested that persistent inflation and a strong economy might lead the Fed to maintain current interest rates throughout the year.
Fed Bank of Boston President Susan Collins echoed this sentiment on Wednesday, emphasizing the need for the economy to cool down to address inflation concerns.
More Fed speakers are scheduled for Thursday and Friday, along with the release of weekly jobless claims data. However, trading activity is expected to remain subdued ahead of next week’s key data releases, especially the April U.S. producer price index and consumer price index, which will offer insights into inflation trends.
Sterling Slides Ahead of BOE Decision
In Europe, GBP/USD declined by 0.2% to 1.2475 ahead of the Bank of England’s rate decision.
While no interest rate changes are anticipated, market focus is on whether the BOE signals a potential rate cut in June, aligning with the European Central Bank’s stance. Expectations for an August rate cut are already priced in, and increased sterling short positions could lead to volatility if post-meeting guidance diverges from market expectations.
EUR/USD traded marginally lower at 1.0732 in Europe, largely unmoved by limited economic data.
“The EUR/USD is likely to remain near 1.0750 unless the BOE adopts a notably dovish tone, influencing GBP/USD and subsequently impacting EUR/USD,” noted analysts at ING.
Yen Weakens Despite Rate Hike Speculation
In Asia, USD/JPY climbed by 0.3% to 155.87, with the yen remaining under pressure despite talk of potential rate hikes by Bank of Japan officials.
BOJ Governor Kazuo Ueda cautioned against inflationary risks stemming from yen weakness, signaling a possible monetary policy shift. However, the yen’s decline persisted despite intermittent intervention efforts.
USD/CNY inched up by 0.1% to 7.2260, as the yuan struggled to maintain gains after robust Chinese import data for April, hinting at resilient domestic demand.
