Dollar Pauses Below Multi-Month Highs as Markets Eye Bank of England Decision
The U.S. dollar held just below multi-month highs on Thursday, easing slightly as investors’ risk appetite improved and attention shifted to the Bank of England (BoE) policy meeting, where markets expect a dovish tone.
Against the euro, the dollar traded at $1.1505, showing little change during Asian hours and only marginally below Tuesday’s three-month peak of $1.1469.
The British pound (sterling) hovered around $1.3065 ahead of the BoE’s 1200 GMT rate decision, after rebounding modestly from a seven-month low of $1.3011 overnight.
Investors Expect Dovish BoE Outlook
Markets currently price in about a 40% chance that the Bank of England will cut interest rates from the current 4% level, with expectations rising after Finance Minister Rachel Reeves signaled potential tax increases that could slow growth.
Even if rates remain unchanged, investors anticipate a soft, dovish policy statement signaling a possible rate cut in early 2026.
“It’s hard to see sterling rallying here. Even if the BoE holds, they’ll likely signal that a cut is coming,” said Rodrigo Catril, Senior Currency Strategist at National Australia Bank.
A decisive break below $1.30 could open the way toward April’s low near $1.2712, analysts warned.
Risk Currencies Rebound on Market Optimism
The Australian and New Zealand dollars were the biggest movers over the past 24 hours, rising alongside a global stock market rebound as investors recovered from a sharp selloff in technology shares earlier in the week.
The Australian dollar (AUD) climbed 0.9% to $0.6513, bouncing from a three-week low, while the New Zealand dollar (NZD) strengthened to $0.5666 after hitting a seven-month trough.
Their gains came despite a rise in U.S. Treasury yields, which followed strong labor data and hints from the U.S. Treasury Department about increasing debt issuance.
“Markets are reacting more to improving risk sentiment,” added Catril. “But for a sustained dollar decline, we’d need clearer economic data — which is limited by the ongoing U.S. government shutdown.”
Dollar Outlook: Supported by Yields, Lacking Fresh Data
The U.S. dollar remains supported by higher Treasury yields, especially against lower-yielding currencies such as the euro and yen. The greenback was steady at 153.98 yen, while the dollar index held firm at 100.06.
Meanwhile, Bitcoin consolidated above $100,000, last trading near $104,000, showing relative strength amid broader market uncertainty.
