June 20 2024: The U.S. dollar edged higher on Thursday, while the British pound slipped lower ahead of the Bank of England’s latest policy-setting meeting.
Dollar Moves Up After Holiday
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 105.122, approaching last week’s one-month high of 105.80.
The dollar’s rise came as U.S. traders returned from a holiday. The day’s economic data includes initial jobless claims and housing starts, which investors will scrutinize for clues on when the Federal Reserve might begin cutting interest rates.
Several Fed officials have expressed caution about expecting rate cuts too soon, seeking more evidence that inflation is under control before easing monetary policy.
“It appears that there is simply not enough confidence in the data to trigger a dovish turn in communication, but markets’ forward-looking nature means that data remains more important than Fed speakers, and the 50bp of cuts priced in by year-end reflects the cautious optimism on disinflation,” said analysts at ING in a note.
Sterling Dips Ahead of BOE Meeting
GBP/USD fell 0.1% to 1.2699 ahead of the Bank of England’s policy meeting later in the session. The central bank is widely expected to keep interest rates unchanged, despite recent data showing annual consumer price inflation falling to 2.0%, in line with its medium-term target. This is a significant drop from the 41-year high of 11.1% reached in October 2022, though wage growth and underlying pricing pressures remain concerns for the central bank.
Euro Impacted by Political Jitters
EUR/USD fell 0.2% to 1.0718 as political uncertainties in the region continued to weigh on the single currency. The European Commission stated on Wednesday that France and six other countries should be disciplined for budget deficits exceeding EU limits, with deadlines for reducing the gaps to be set in November. This follows French President Emmanuel Macron’s call for a snap election after poor results for his party in the European Parliament elections, throwing the EU’s second-largest economy into political turmoil.
Swiss Franc and Yen Movements
USD/CHF rose 0.7% to 0.8901 after the Swiss National Bank reduced its key interest rate by 25 basis points, continuing its rate-cutting cycle despite a recent rebound in economic growth and a break in the trend of gently falling inflation in Switzerland.
In Asia, USD/JPY traded 0.2% higher at 158.44, hitting a one-month high as the yen continued to show weakness following the Bank of Japan’s relatively dovish stance on bond purchases at its recent policy meeting.
USD/CNY traded 0.1% higher at 7.2604, with the Chinese yuan under pressure amid doubts about the strength of the country’s economic recovery.