US dollar edges up slightly at the beginning of Thursday’s session

The US dollar edges up slightly at the beginning of Thursday’s trading session, recovering from the sharp losses of the previous session.

The dollar index, which tracks the performance of this currency against a basket of other six major currencies, edges up slightly to 103.065, after falling more than 0.5% on Wednesday.

The Fed decided to keep interest rates unchanged on Wednesday, as expected, but also maintained the forecast for three rate cuts this year, although it anticipates slightly slower inflation growth.

The stiffness of inflation data had raised concerns that the Fed might lower its rate cut projections for this year, but the central bank did not adopt a more aggressive tone, leading to a decline in the dollar.

According to CME’s Fedwatch tool, traders now believe there is over a 70% chance of the Fed cutting rates by 25 basis points in June.

The GBP/USD pair edged down 0.1% to the level of 1.2776, awaiting the Bank of England’s meeting later in the day.

It appears likely that the BoE will keep interest rates unchanged, but UK inflation slowed in February—falling to 3.4% on an annual basis after January’s 4.0% rise, marking the weakest inflation rate since September 2021—suggesting that the central bank might start cutting interest rates in the coming months.

The EUR/USD pair rose 0.1% to the level of 1.0920, after hitting one-week highs against the dollar at the start of the session.

The European Central Bank has sought to dampen speculation about a series of interest rate cuts, and President Christine Lagarde said on Wednesday that the ECB could not commit to a specific number of rate cuts or even begin to reduce borrowing costs.

The USD/JPY pair dropped 0.2% to the level of 150.99, after reaching four-month highs. The prospects of a US interest rate cut and a more aggressive Bank of Japan bode well for the yen, which has been weighed down by the increase in US interest rates over the past year.