Investing.com – The US dollar rose on Thursday, trading in a narrow range ahead of important US inflation data next week, while the pound fell ahead of the Bank of England's policy meeting.
At 04:35 EDT (08:35 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 105.605, rebounding after a one-month low last week.
Tight trading range ahead of US CPI
The dollar stabilized this week, after sharp losses last week, after a number of Federal Reserve officials disputed the idea that interest rate cuts are certain this year.
The head of the Federal Reserve Bank of Minneapolis suggested on Tuesday that stubborn inflation and a strong economy could convince the US central bank to keep interest rates unchanged for the rest of this year.
The head of the Federal Reserve Bank of Boston continued this theme on Wednesday, saying that the US economy needs to calm down to bring inflation back on target.
There are more speakers scheduled for Thursday and Friday, in addition to weekly statements.
However, trading ranges are likely to be limited ahead of the April meeting in the US next week, in particular, which traders will be watching for signs that inflation has resumed its downward trend towards the Fed's 2% target rate.
The British pound declines ahead of the Bank of England meeting
In Europe, trading fell by 0.2% to 1.2475, before the last meeting to set the interest rate.
The BoE is not expected to move interest rates later on Thursday, so the big question is whether officials are signaling a cut will come in June, when the ECB has already indicated it will do so.
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The cut has been fully priced in for August, and short positions in sterling rose last week to their biggest levels since January 2023, so sterling could be volatile if post-meeting guidance doesn't match market expectations.
In Europe, it traded 0.1% lower at 1.0732, largely unchanged given the light data calendar.
“It is difficult to see EUR/USD breaking away from 1.0750, unless the Bank of England is clearly dovish and drags GBP/USD down with it,” analysts at ING said in a note.
The yen is drifting lower despite talk of raising interest rates
In Asia, it rose 0.3% to 155.87, with the yen remaining weak despite hawkish views from Bank of Japan members.
A summary of the Bank of Japan's views released earlier Thursday showed board members were overwhelmingly hawkish at the April policy meeting, with many calling for steady rate hikes.
Bank of Japan Governor Kazuo Ueda also warned that any inflationary pressures resulting from a weak yen could lead to a tightening of monetary policy by the central bank.
However, the yen resumed its decline even after two rounds of suspected intervention.
It rose 0.1 percent to 7.2260, with the yuan struggling to maintain its previous gains after data showed much greater-than-expected growth in China in April, indicating some strength in domestic demand.