The U.S. dollar strengthened on Thursday after the Federal Reserve signaled it was in no hurry to cut interest rates further this year, citing uncertainties surrounding U.S. tariffs.
Meanwhile, the British pound remained lower following the Bank of England’s decision to keep rates steady.
The Swiss franc weakened slightly after the Swiss National Bank lowered its policy rate to 0.25%, while the Swedish crown softened after its central bank maintained its interest rate. The Federal Reserve held its benchmark overnight rate within the 4.25%-4.50% range, with policymakers projecting two quarter-point rate cuts later this year, maintaining the same forecast from three months ago.
Fed Chair Jerome Powell emphasized a cautious approach, stating that the current policy stance was well-positioned to address economic risks and uncertainties.
Concerns over U.S. tariffs and their economic impact remain a challenge for policymakers as President Donald Trump prepares to implement new duties on imports. Market expectations indicate around 63 basis points of Fed easing this year, with traders pricing in two 25-basis-point cuts and a 50% chance of a third.
Market data suggests the next rate cut is expected in July.
The dollar index rose 0.5% to 103.85, staying close to a five-month low of 103.19 reached earlier in the week. The euro weakened by 0.5%, trading at $1.0849.
The British pound recovered some of its losses after the Bank of England held interest rates steady, aligning with expectations but cautioning against assumptions of rate cuts in the near future. Sterling had climbed to a four-month high of $1.3015 before retreating to $1.2975.
The Swiss franc edged lower against both the dollar and the euro after the Swiss National Bank delivered its fifth consecutive rate cut and signaled readiness to intervene in the foreign exchange market if necessary. Meanwhile, Sweden’s central bank kept its policy rate at 2.25%, as expected, leading to a slight decline in the crown against the strengthening dollar and euro.
The yen gained slightly to 148.45 per dollar following the Bank of Japan’s decision to hold rates steady. The central bank warned of rising global economic uncertainties, suggesting future hikes would depend on developments related to U.S. tariffs.
The Australian dollar dropped 1.1% to $0.6286 after employment data showed an unexpected decline in February, ending a streak of strong gains and indicating a slight loosening in the labor market despite a stable jobless rate.
The New Zealand dollar also declined by 1.4% to $0.5736, despite economic data showing a faster-than-expected growth rate of 0.7% in the last quarter, though underlying economic indicators remained weak.
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