The dollar experienced slight declines on Thursday with trading largely subdued in anticipation of the upcoming U.S. inflation report, while the British pound strengthened on diminished expectations of an August rate cut from the Bank of England (BoE).
In early Asian trading, the British pound reached a one-month high of $1.28545, extending its 0.48% gain from the previous session. The uptick followed remarks from BoE policymakers that tempered market bets on an imminent easing cycle.
BoE Chief Economist Huw Pill highlighted persistent price pressures in the British economy and emphasized that the timing of any rate adjustment remains uncertain. His colleague Catherine Mann indicated reluctance towards supporting a rate cut in August.
ANZ analysts noted, “Ahead of BoE’s August 1 meeting, the Monetary Policy Committee (MPC) will have only one more set of data.” They added, “Our view is as data improves over summer, the MPC will have greater confidence to cut rates in September.”
Meanwhile, the broader currency market saw the dollar under pressure as investors refrained from taking new positions ahead of the U.S. inflation data release.
The euro edged up 0.04% to $1.0834, while the Australian dollar inched 0.01% higher to $0.6754. The dollar index, which measures the greenback against a basket of currencies, held steady at 104.95.
Market expectations point to a 0.2% monthly increase in core U.S. inflation for June, potentially pushing the annual figure to 3.4%. Carol Kong, a currency strategist at Commonwealth Bank of Australia, commented, “That outcome will obviously build confidence that the FOMC will be able to cut rates fairly soon.”
Federal Reserve Chair Jerome Powell underscored on Wednesday that rate decisions will be made based on economic indicators rather than political considerations.
Elsewhere, the New Zealand dollar rebounded 0.11% to $0.60885 following losses triggered by the Reserve Bank of New Zealand’s dovish stance in its recent monetary policy statement.
The yen remained subdued against the dollar, trading near a 38-year low at 161.54, influenced by significant interest rate differentials between the U.S. and Japan.
