After Federal Reserve Chair Jerome Powell delivered a predictable semi-annual testimony, the dollar remained near a one-month low against a basket of currencies on Thursday.
Sterling was approaching a one-year high ahead of the BoE’s interest rate decision later in the day, with Wednesday’s strong inflation report likely to keep officials on their toes.
Powell told Capitol Hill legislators on Wednesday that more U.S. rate increases are “a pretty good guess” if the economy continues its current course. Last week’s central bank policy meeting echoed those remarks.
The dollar fell 0.5% against six major peers in the previous session. Early Asia trade saw the U.S. dollar index at 102.05, near its five-week low 102.00.
Wednesday’s 0.65% euro rise continued at $1.09925.
“Markets had priced a lot of hawkishness from Powell prior to his testimony, so his comments didn’t really surprise too much on the hawkish end,” said CBA currency strategist Carol Kong.
“At this stage, (markets) are not convinced that the FOMC can do two more rate hikes this year.”
Sterling climbed 0.02% to $1.2770, near last week’s one-year high of $1.2849.
After higher-than-anticipated inflation figures, the BoE is expected to raise interest rates for the 13th time on Thursday. Investors are split between a 25-basis-point and a 50bp hike.
In May, British inflation remained at 8.7%, surprising market predictions.
“The strong U.K. inflation data raised the probability of a larger hike than 25bp, a higher terminal rate and rates staying higher for longer,” ANZ economists wrote.
After reaching a seven-month high of 142.37 yen the previous session, the dollar fell 0.06% to 141.82.
The BOJ’s ultra-dovish approach has put pressure on the Japanese yen. Wednesday saw BOJ board member Seiji Adachi hint at a July policy change.
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