Investing.com – The U.S. dollar rose on Thursday, trading in a tight range ahead of key U.S. inflation data next week, while the pound fell ahead of the Bank of England’s policy meeting.
At 04:35 ET (0835 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 105.605, recovering from last week’s one-month low.
Narrow trading range ahead of US CPI
The dollar steadied this week after sharp losses last week after some Fed officials pushed back against the idea that rate cuts are inevitable this year.
The head of the Minneapolis Fed suggested on Tuesday that persistent inflation and a resilient economy could persuade the U.S. central bank to keep interest rates unchanged through the end of this year.
The President of the Federal Reserve Bank of Boston continued that theme on Wednesday, saying the U.S. economy needs to cool to bring inflation back to target.
There will be more speakers on Thursday and Friday, as well as weekly data.
However, trading ranges are likely to be constrained ahead of the US April index next week and the US index in particular, which traders will be watching for signs that inflation has resumed its downward trend towards the Fed’s 2% rate target. .
Sterling fell ahead of Bank of England meeting
In Europe, shares traded 0.2% lower at 1.2475 ahead of the latest rate-setting meeting.
The UK’s central bank is not expected to change interest rates later on Thursday, so the big question is whether officials are signaling the cut will come in June, when the European Central Bank has already signaled it will.
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The cut is fully planned for August, and last week sterling shorts rose to their highest level since January 2023, so sterling could be volatile if post-meeting forecasts fall short of market expectations.
In Europe, shares traded 0.1% lower at 1.0732, little changed given the weak data calendar.
“It is difficult to expect EUR/USD to break much beyond 1.0750 unless the Bank of England is clearly dovish and GBP/USD drags EUR/USD lower,” ING analysts said in a note.
Yen falls despite talk of rate hikes
In Asia, the index rose 0.3% to 155.87, with the yen remaining weak despite hawkish views from Bank of Japan members.
A summary of BOJ views released earlier Thursday showed board members were overwhelmingly hawkish at its April policy meeting, with many calling for a sustained rise in interest rates.
Bank of Japan Governor Kazuo Ueda also warned that any inflationary pressure caused by the yen’s weakness could lead to a tightening of monetary policy by the central bank.
However, the yen still resumed its decline even after several bouts of supposed intervention.
rose 0.1% to 7.2260, with the yuan struggling to maintain earlier gains after data showed Chinese growth in April was well above expectations, signaling some strength in domestic demand.