The US dollar is firmer and was able to record gains against major currencies on Thursday after Fed Chair Jerome Powell signaled US interest rates will likely peak at a higher level than markets expected, while sterling fell after the Bank of England raised rates but warned of a “very challenging outlook.”
The BoE lifted UK interest rates to 3% from 2.25% in its largest single increase since 1989, as it battles the twin forces of a slowing economy and red-hot inflation.
The UK central bank forecasts inflation will hit a 40-year high 11% during the current quarter, but it pushed back against expectations for further steep rate hikes. The bank said Britain has already entered a recession that could potentially last two years, longer than during the 2008-09 financial crisis.
“It is very premature to be thinking about pausing” on the effort to lift the federal funds target rate, Powell said in a news conference on Wednesday.
The dollar’s dominance will continue as thoughts of a recession grow for the global economy, which will drive more flight to safety bids towards the dollar. The futures markets on Thursday priced in US rates peaking at 5.15% at the June meeting in 2023, which was up from about 4.9% initially expected in May.
In afternoon trading, the euro fell 0.6% against the dollar to $0.9758 . That pushed the dollar index up 0.7% on the day at 112.86 . Earlier, it touched 113.15, its highest since October 21.<\/p>\n","protected":false},"excerpt":{"rendered":"
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