© Reuters. FILE PHOTO: An employee calculates US dollar bills at a currency exchange in central Cairo, Egypt, on March 20, 2019. REUTERS / Mohamed Abd El Ghany / File Photo
LONDON (Reuters) – The dollar slipped slightly in early European trading on Thursday as the week gradually moved away from two-month highs hit after the surprise boost by the US Federal Reserve in its session last week.
Currency markets were quiet as traders weighed in on different signals from Federal Reserve System officials about the timing of withdrawal of monetary stimulus.
The lower to 91,738 at 0715 GMT, reducing some gains after hitting a two-month high of 92,408 on Friday.
The euro was slightly higher against the dollar, up 0.1% on the day at $ 1.1939.
The dollar received some support suddenly from two Fed officials, saying a period of higher inflation in the U.S. could last longer than expected.
But on Tuesday, Fed Chairman Jerome Powell said price pressures should ease themselves.
Six Fed officials are due to speak on Thursday, including New York Fed Chairman John Williams, who on Tuesday said any conversation about when to adjust interest rates is still a long way off.
“It seems that the market price of (the) Fed’s expectations is already sitting on the low side, so additional comments indicating early declines / outflows now have a more contented and primarily short-term impact on sensitive assets,” ING FX strategists wrote in a note to customers.
“We continue to expect the market to reward those currencies backed by tight cycles (NOK, CAD and NZD are notable examples in G10 space), although the space for rally in low producers is likely to decline.”
Market attention is focused on the meeting and policy announcement of the Bank of England at 1100 GMT. No policy changes are expected, but investors will look for any hints that the BoE will follow in the Fed’s footsteps as inflationary pressures rise.
Andy Haldane will likely vote again to reduce the bond-buying program at his final meeting before leaving the BoE and market players will be inclined to see if any other politicians join him in doing so.
Sterling was slightly lower in early London trading, down 0.1% at $ 1.3962 and 85,495 pence per euro.
“I’m not sure if the BoE will send the signal that the sterling bulls are hoping for,” wrote Commerzbank (DE 🙂 strategist Thu Lan Nguyen in a note to clients.
“I fear it may be too early and that the recent rise in inflation has not yet risen high enough. As a result, I see a considerable possibility of disappointment for Sterling today.”
The Australian dollar, which is seen as a liquid proxy for currency market risk appetite, was flat on the day at $ 0.75745, gaining 1.3% so far this week.
The U.S. dollar fell 0.1% against the yen after the pair reached a 15-month high of 111.11 abruptly.
Elsewhere, bitcoin fell 2% to $ 33,000, somewhat recovering from falling to $ 28,600 on Tuesday. Ether traded around $ 1,900.
Data on U.S. jobs are to be released later in the session.
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