Dollar Rally Stalls Ahead of Bank of England Rate Decision
The dollar's post-Fed rally stalled on Thursday ahead of the Bank of England's rate decision, causing sterling to trade flat. The euro held near recent levels, with sterling unchanged at 1.3381 and the euro up 0.03% to 1.1468 as of 04:12 ET (08:12 GMT). Francesco Pesole, FX strategist at ING, noted that risks are more balanced for the dollar now that the monetary policy boost has been absorbed.
The Federal Reserve's decision on Wednesday was a 25bp hike alongside a hawkish dot plot. This led to a broad rally in the dollar, with sterling up 0.6% and at a two-month high. Pesole said the dollar's trajectory remains 'heavily reliant on a de-escalation in the Gulf,' with oil prices being a key swing factor.
The Bank of England is expected to hold rates at 3.75% later on Thursday, with a 6-3 vote split in line with consensus. ING expects any dovish tilt to weigh on sterling against both the dollar and euro, targeting EUR/GBP at 0.87 by year-end.