breaking News: The U.S. Dollar index (DXY) experienced a continued decline Thursday, while the Euro and British Pound both saw gains amid anticipation of a potential interest rate cut by the Bank of England (BoE).
The U.S. Dollar Index, which measures the dollar’s value against a basket of six major currencies – the euro, japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc – edged down to 98.133, building on a 0.6% decrease recorded on Wednesday. This follows a period of dollar strength earlier in the year driven by expectations of wider interest rate differentials between the U.S. Federal Reserve and other central banks.
The euro appreciated by 0.1% to $1.1672, extending the 0.7% increase observed in the previous trading session. The exchange rate between the euro and the U.S.dollar (EUR/USD) is a key indicator of global economic sentiment and trade flows. Currently, the European Central Bank (ECB) maintains a key interest rate of 4.50%.
Sterling (GBP) also strengthened, rising 0.2% to $1.3371.The GBP/USD exchange rate is heavily influenced by the economic performance of both the United Kingdom and the United States, and also expectations regarding monetary policy from the BoE and the Federal Reserve. The UK’s Office for national Statistics (ONS) reported a 0.3% increase in UK GDP for the first quarter of 2024, contributing to the pound’s recent gains.
The Bank of England is widely expected to lower its benchmark interest rate at its meeting on Thursday, marking the fifth reduction in the past 12 months.Though, persistent inflationary pressures within the UK economy are creating divisions within the Monetary Policy Commitee (MPC). Current UK inflation stands at 3.2% as of March 2024, still above the BoE’s 2% target.
Sources indicate that at least two members of the MPC are considering advocating for a more aggressive 0.5 percentage point rate cut, while another two members are likely to argue against any change to the current rate.This divergence in views highlights the complexity of the economic challenges facing the UK, balancing the need to stimulate growth with the risk of further fueling inflation. The nine-member MPC includes Governor Andrew Bailey,Deputy Governors Sarah Breeden,Ben broadbent,and Dave Ramsden,and Chief Economist Huw Pill.
