Written by Joyce Alves
London, September 20 (Reuters) – The dollar edged lower on Wednesday ahead of the Federal Reserve’s long-awaited interest rate decision later in the day, while the pound fell on increased Bank of England bets (bank of england) will suspend historic interest rate hikes.
us dollar index = USDThe value, which measures the currency against a basket of rivals, was down 0.1% at 105.00.
lb GBP=D3 The index was last volatile at $1.2364, down 0.23%, after hitting an almost four-month low after data showed British inflation slowed more than expected in August.
British annual herb consumer price inflation The CPI unexpectedly fell to 6.7% in August, official data showed on Wednesday, a day before the BoE was expected to raise interest rates again.
A Reuters poll of economists had predicted that the CPI would rise to 7.0% from 6.8% in July.
Dominic Banning, head of European currency research at HSBC, said softening in core and services inflation in particular should provide some comfort and limit the BoE’s rate hike on Thursday, the peak of the business cycle, to 25 basis points. .
“The market is likely to (then) slowly start to realize that the next move in UK interest rates will be lower rather than higher,” Bunning said.
“This could depress the pound, particularly against the US dollar, where rate cuts may already be overpriced.”
goldman sachs on Wednesday said the Bank of England is expected to keep interest rates on hold on Thursday after data showed British inflation was much lower than expected in August.
Money markets are starting to price in an almost 60% chance that the central bank will leave interest rates unchanged on Thursday, after 14 consecutive rate hikes through December 2021. As of Tuesday, there was only a 20% chance the central bank would suspend interest rates.
Elsewhere, the focus is on the central bank’s forward guidance, with markets expecting the Fed to almost certainly keep interest rates on hold at 5.25% to 5.50%.
Elsa Lignos, global head of foreign exchange strategy, said: “Chairman Powell will aim for a neutral and firm rhetoric, acknowledging developments in the data, continuing to emphasize dependence on data, and discouraging the possibility of further rate hikes.” “We will continue to maintain this policy and make only vague references to the path to 2024.” At RBC Europe.
Futures markets are pricing in a 30% chance of a quarter-point rally in November and a 35% chance of a December rally, according to the CME FedWatch tool.
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The focus on the yen remained as U.S. and Japanese officials piled up new comments about possible intervention.
circle JPY=EBS Ahead of the Fed’s decision, the dollar touched a new 10-month low of 148.17 before moving flat at 147.87.
Japan’s top financial diplomat, Masato Kanda, reiterated his warning on Wednesday that Japanese authorities are constantly intervening. close communication He closely monitors market movements with a “high sense of urgency” and consults with U.S. and international policymakers on currencies.
Asked if Washington would do so. show understanding Overnight, U.S. Treasury Secretary Janet Yellen said Japan’s new yen-buying intervention would “depend on the specifics” of the situation.
Speculation has increased that the Bank of Japan could exit its ultra-easy policy sooner than expected, and the bank is likely to do so. keep Interest rates hit ultra-low levels on Friday, reassuring markets that monetary stimulus will remain in place for now amid economic uncertainty.
offshore renminbi CNH=D3 The rate remained unchanged at 7.3055 as China met market expectations by maintaining its standard lending rate. No change on wednesday.
EUR Euro=EBS It rose 0.24% to $1.0705.
world exchange rates https://tmsnrt.rs/2RBWI5E
(Reporting by Joyce Alves in London; Additional reporting by Brigid Riley in Tokyo; Editing by Jerry Doyle and Emelia Sithole-Matarise)
((Joice.alves@thomsonreuters.com;))
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