Investors await central bank decisions from the UK, Switzerland, and Norway amidst steady currency movements
The British pound held broadly steady on Thursday as markets awaited a rate decision from the Bank of England (BoE) later in the day. The dollar was similarly subdued, with traders looking for fresh market catalysts.
Following a US holiday, currencies traded within tight ranges. Investors were not only focused on the BoE but also on upcoming central bank decisions in Switzerland and Norway.
Sterling was last at $1.2719, having eked out a slight gain in the previous session. The euro rose 0.03% to $1.0747.
The dollar slipped 0.05% against the yen to 157.99, although the Japanese currency remained close to an over one-month low of 158.255 per dollar reached last week. The dollar index, which measures the greenback against a basket of currencies, was little changed at 105.23, staying some distance from last week’s one-month high.
The BoE is widely expected to keep rates steady on Thursday, with attention on any guidance about the timing of potential rate cuts. British inflation data released on Wednesday showed a return to the BoE’s 2% target for the first time in nearly three years in May. However, underlying price pressures suggested an early rate cut is unlikely.
“There’s no doubt they keep rates on hold,” said Tony Sycamore, a market analyst at IG. “The headline numbers for inflation were probably a welcome relief, but there were upside surprises in services components again.”
“Potentially they could open the door at the next meeting, but it still seems like we’re two meetings away from a potential rate cut there for me,” Sycamore added.
In contrast, the Swiss National Bank (SNB) is expected to cut its key policy rate by 25 basis points for a second consecutive meeting. Recent strength in the Swiss franc and benign domestic inflation support the case for looser monetary conditions.
The Swissie last stood at 0.8840 per dollar, near a three-month high. Against the euro, the Swiss franc hovered near a four-month high of 0.94785, reached in the previous session. The euro continues to be pressured by political turmoil in France and the wider eurozone.
“The Swissie has performed quite well against the euro, and inflation has been declining in Switzerland, so again, the strength of the Swissie doesn’t play well for this idea that you want to get inflation a little bit higher,” noted Rodrigo Catril, senior currency strategist at National Australia Bank.
Elsewhere, the Australian dollar edged 0.01% higher to $0.6673, while the New Zealand dollar steadied at $0.6131. Data on Thursday showed New Zealand’s economy grew faster than expected in the first quarter but remained soft, having little impact on market views of the country’s rate outlook.
