Sterling steady ahead of BoE decision; dollar wobbles against yen

The British pound remained stable on Thursday ahead of the Bank of England’s rate decision later in the day, while the dollar was in a weak position as it awaited market catalysts. Currency trading was limited due to a holiday in the United States and investors were also looking at central bank decisions in Switzerland and Norway. Sterling was at $1.2719 after a small gain in the previous session, while the euro rose to $1.0747. The dollar slipped against the yen to 157.99, but the Japanese currency was not far from its one-month low of 158.255 per dollar. The dollar remained unchanged against a basket of currencies at 105.23. The focus will be on the Bank of England’s rate decision and any indication of when an easing cycle may begin.
According to recent data, British inflation has reached its 2% target for the first time in almost three years. However, a closer look at the report reveals ongoing underlying price pressures, eliminating the possibility of an immediate interest rate cut.

Market analyst Tony Sycamore from IG stated that it is clear the rates will be kept unchanged. While the inflation figures may have been a relief, there were unexpected increases in service components.

Sycamore also mentioned that there is a possibility of a rate cut at the next meeting, but it is more likely to occur two meetings from now.

In contrast, the Swiss National Bank (SNB) is expected to reduce its key policy rate by 25 basis points for the second consecutive meeting. This decision is supported by the recent strength of the Swiss franc and the absence of significant domestic inflation.

Currently, the Swiss franc is trading at 0.8840 per dollar, close to a three-month high.
The Swiss franc remained close to a four-month high of 0.94785 per euro, as the euro continues to face pressure from political unrest in France and the wider European Union. This strong performance of the Swiss franc against the euro, coupled with declining inflation in Switzerland, does not bode well for efforts to increase inflation.

In other currency news, the Australian dollar slightly increased by 0.01% to $0.6673, while the New Zealand dollar stabilized at $0.6131.

Despite better-than-expected economic growth in the first quarter, New Zealand’s economy remains soft, and this data did not significantly impact market expectations for the country’s interest rate outlook.