The US dollar slipped against the pound on Thursday after a dovish US Federal Reserve signalled it was ready to lower interest rates. On Wednesday evening, the Fed left interest rates unchanged as expected at 2.5 per cent, however the bank dropped its pledge to be “patient”. Meanwhile, the central bank hinted that it was ready to cut interest rates as early as July thanks to growing domestic risks and heightened US-China trade tensions. The majority of policymakers cut their rate outlook for the rest of 2019 by around half a percentage point, and the rest agreed it looks likely that lower rates will be appropriate.
However, Fed Chair Jerome Powell suggested the FOMC committee wanted further information before acting.
Speaking at a press conference, Mr Powell said: “We’d like to see if these risks continue to weigh on the outlook.
“We want to see and we want to react to trends that are sustained, that are genuine.”
Sterling was able to hold onto its gains ahead of today’s Bank of England (BoE) meeting as policymakers are expected to hint at interest rate hikes.
The basis for this assumption is that Wednesday’s UK CPI figure edged down to 2 per cent in May, moving into the BoE’s target zone.
This likely reassured the central bank that there was no urgency to raise interest rates.
While it is largely expected the bank will leave interest rates unchanged, if it signals it is prepared to raise them in 2019 it could provide an upswing of support to the pound.
Meanwhile, the US dollar could slide further following the release of the Philadelphia Fed manufacturing survey later today.
If the survey figures fall further than expected for June, it could weigh heavily on the greenback.