Dollar gains on geopolitical tensions, pound slips after rate cut
Bank of England cut interest rates from a 16-year high.
Concerns about a widening conflict in the Middle East intensified this week after Hamas leader Ismail Haniyeh was assassinated in the Iranian capital Tehran on Wednesday morning, an attack that drew threats of revenge on Israel.
«We are looking at the threat of outright conflict breaking out in the Middle East,» said Karl Schamotta, chief market strategist at Corpay in Toronto. «That is supporting the dollar's safe haven appeal.»
The dollar also bounced as a selloff on Wednesday following dovish comments by Federal Reserve Chair Jerome Powell at the conclusion of the U.S. central bank's two-day meeting was seen as possibly overdone.
«Although Jerome Powell was extremely dovish in the press conference, the statement released by the Federal Open Market Committee really sounded more balanced,» said Schamotta.
Powell said that interest rates could be cut as soon as September if the U.S. economy follows its expected path, after the Fed's new policy statement noted that «there has been some further progress toward the (Federal Open Market) Committee's 2% objective,» while the unemployment rate, at 4.1%, «remains low.»
Traders are now pricing in three 25-basis-point rate cuts by year-end, indicating one cut at each of the Fed's September, November and December meetings.
The next major U.S. economic release that is likely to drive Fed policy will be Friday's government jobs report for July. It is expected to show that employers added 175,000 jobs during the
