The US dollar strengthened on Thursday as escalating geopolitical tensions in the Middle East boosted its safe-haven appeal. Meanwhile, the British pound fell after the Bank of England cut interest rates from a 16-year high.
Concerns about a widening conflict in the Middle East intensified after the assassination of Hamas leader Ismail Haniyeh in Tehran. The dollar also rebounded from a Wednesday selloff following dovish comments by Fed Chair Jerome Powell. The Fed’s statement, however, was viewed as more balanced, supporting the dollar’s gains.
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The British pound dipped after the BoE cut rates by a quarter point to 5%, a move that signaled a cautious approach to tackling inflation. The BoE’s decision reflects concerns about the UK economy’s continued pressure.
Traders are pricing in three 25-basis-point rate cuts by year-end, suggesting a cautious path forward for the Fed. The next key US economic release is Friday’s jobs report, which is expected to show job growth of 175,000.