Forex News:Dollar Rebounds as Fed Signals Caution; Pound Weakens Ahead of BOE Decision and More
Dollar Rises as Sterling Slips Ahead of BOE DecisionThe U.S. dollar edged higher on Thursday, rebounding from five-month lows following the Federal Reserve’s latest policy announcement. Meanwhile, the British pound weakened ahead of the Bank of England’s (BOE) rate decision.At 5:35 AM ET (09:35 GMT), the U.S. Dollar Index climbed 0.5% to 103.560, recovering from its lowest levels in months.
Dollar Strengthens Post-Fed Meeting
The Federal Reserve kept interest rates steady at 4.25%-4.50%, as widely anticipated. However, policymakers signaled that two quarter-point rate cuts could be expected later this year.
Analysts at ING noted that the Fed’s outlook remained more hawkish than market expectations, as traders were pricing in 65 basis points of easing in 2025, with the first cut anticipated in July.
Fed Chair Jerome Powell acknowledged ongoing inflation concerns and uncertainty regarding the labor market. The central bank is also navigating potential economic risks tied to President Donald Trump’s proposed tariffs on U.S. trading partners.
Investors are keeping an eye on upcoming U.S. economic data, including weekly jobless claims and the Philadelphia Fed manufacturing index, which could influence the dollar’s trajectory.
Pound Drops Ahead of BOE Meeting
The GBP/USD pair dipped 0.2% to 1.2956 as the U.K. job market showed stability ahead of the BOE’s latest policy announcement.
The U.K.’s unemployment rate held steady at 4.4% in January, while pay growth, excluding bonuses, remained at 5.9%. The number of job vacancies rose for the first time since mid-2022, signaling a stabilizing labor market.
With inflation creeping higher last month, the BOE is expected to hold interest rates steady, giving policymakers more time to assess economic conditions.
Euro Declines on Trade War Fears
The EUR/USD pair fell 0.4% to 1.0854 after European Central Bank (ECB) President Christine Lagarde warned that a full-scale U.S.-EU trade war could significantly impact the eurozone economy and fuel inflation.
The U.S. has already imposed tariffs on steel and aluminum, prompting the EU to announce retaliatory measures set to take effect in April.
Swiss Franc and Chinese Yuan Weaken
The USD/CHF pair climbed 0.4% to 0.8822 after the Swiss National Bank cut interest rates by 25 basis points to 0.25%, marking its fifth consecutive rate cut since early 2024.
Meanwhile, the Chinese yuan slipped, with USD/CNY rising 0.2% to 7.2453, as the People’s Bank of China left its benchmark loan prime rate unchanged at record lows.
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