Dollar Broadly Higher, Pound at 2-Week Lows after BoE

Aug 02, 2018

The dollar was broadly higher against a currency basket on Thursday a day after the Federal Reserve indicated that it is on track for additional rate hikes this year and as fresh concerns over trade tensions boosted safe haven demand.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.36% to 94.80 by 11:03 AM ET (15:03 GMT).

Demand for the dollar continued to be underpinned after the Fed said Wednesday that U.S. economic growth has been rising strongly and the job market has continued to strengthen, indicating that they will stick to plans for additional rate hikes this year.

The dollar was also supported by safe haven demand amid renewed concerns over global trade tensions.

The Trump administration indicated Wednesday that it is planning to increase tariffs on $200 billion worth of Chinese imports to 25% after initially setting them at 10%, escalating a trade conflict between the world’s two largest economies.

The euro was weaker against the dollar, with EUR/USD sliding 0.38% to 1.1616.

Against the yen, the dollar was lower with USD/JPY shedding 0.26% to trade at 111.44.

Investors often seek out the relative safety of the Japanese currency during times of market turmoil or heightened geopolitical tensions.

The pound fell to its lowest levels in two weeks, with GBP/USD off 0.75% at 1.3027.

The decline in sterling came despite a rate hike by the Bank of England earlier Thursday.

The BoE’s Monetary Policy Committee voted unanimously to raise rates by a quarter of a percentage point to 0.75% despite deepening worries over Brexit

It the highest level since March 2009 and is only the second rate hike in a decade after the BoE last raised interest rates in November, reversing a rate cut imposed after the Brexit vote in 2016.

Sterling remained on the back foot after the BoE noted that any future increases are likely to be gradual and limited.