Investing.com – The U.S. dollar was marginally higher in European trade on Thursday, recovering from sharp losses in the previous session after the Federal Reserve maintained its forecasts for interest rate cuts this year, while the Swiss franc fell following a surprise cut by the Swiss national bank.
At 04:20 ET (0920 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading marginally higher at 103.065, after falling more than 0.5% on Wednesday.
Fed plans three rate cuts this year
Interest rates remained unchanged on Wednesday, as widely expected, but also remained within the scope of three rate cuts this year, although inflation had been forecast to fall slightly more slowly.
The weak inflation readings raised concerns that Fed officials would narrow their forecasts for rate cuts this year, but the central bank did not take a more aggressive tone, sending the dollar lower.
Traders now estimate there is more than a 70% chance the Fed will cut rates by 25 bps, according to CME’s Fedwatch tool. in June.
According to Goldman Sachs analysts, the Fed is unlikely to delay rate cuts for a long period and plans the first reduction at its June meeting.
“We continue to expect cuts in June, September and December, for a total of 3 cuts in 2024,” they added.
Swiss franc falls after rate cut
In Europe, the index rose 0.9% to 0.8945 after it surprised the market by cutting its benchmark interest rate by 25 basis points to 1.5%, becoming the first major central bank to cut interest rates this cycle.
The move comes after Swiss inflation fell to 1.2% in February, the ninth month in a row that price growth has been within the SNB’s 0-2% target range, and is likely aimed at curbing the Swiss franc’s recent appreciation .
SNB chief Thomas Jordan suggested in Davos that the recent rise in the franc was causing problems for exporters and the move was likely aimed at weakening the currency.
fell 0.1% to 10.5484 after keeping its benchmark interest rate unchanged at 4.50% on Thursday, as analysts had unanimously expected.
fell 0.1% to 1.2776 ahead of the Bank of England’s policy meeting later in the session.
Interest rates are expected to remain unchanged, but UK inflation slowed in February – falling to 3.4% year on year after rising 4.0% in January, the lowest inflation rate since September 2021 – suggesting that central the bank may begin to lower interest rates. in the coming months.
traded 0.1% higher at 1.0920 after hitting a one-week high against the dollar earlier in the session.
The European Central Bank has sought to ease speculation about a series of interest rate cuts, with the president saying on Wednesday that the ECB could not commit to a specific number of rate cuts even after it starts lowering borrowing costs.
Yen rebounds from four-month low
traded 0.2% lower at 150.99, falling from a four-month high as the prospect of lower U.S. interest rates and more hawkish sentiment from the Bank of Japan bode well for the yen, which was hit by higher U.S. interest rates last year.
Purchasing Managers’ Index data for March showed some resilience in the Japanese economy, with activity contracting less than expected while the sector continued to expand.
rose 0.4% to 0.6613, with the rise mainly driven by substantially stronger-than-expected labor market data, which also showed the unemployment rate falling to a six-month low.