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The U.S. dollar eased slightly on Thursday as investors digested the possibility that Federal Reserve may raise interest rates further than expected, while sterling edged higher ahead of the Bank of England policy meeting.
The Fed on Wednesday raised its benchmark funds rate by 75 basis points (bps) to 3.75-4 percent as widely expected. The dollar initially fell on hints in the Fed’s statement of smaller hikes ahead, but regained strength after Chair Jerome Powell said that the battle against inflation will require borrowing costs to rise further.
“Incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” Powell told reporters, adding: “It is very premature to be thinking about pausing… we have a ways to go.”
The hawkish stance from Powell dashed hopes of a pivot to a less aggressive stance and saw the dollar hit a week-high of $0.9810 per euro in early Asia trade. But the greenback lost some steam through the day and was last trading at $0.
