The dollar eased lower in early European trade Thursday, retreating from a one-month high as traders digested the previous session’s Federal Reserve meeting and what it means for future monetary policy.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 93.332, slipping from a one-month high of 93.526.
the risk sensitive AUD/USD fell 0.1% to 0.7241, near multi-week lows.
The Fed left policy settings unchanged on Wednesday, as expected, and also decided against announcing the beginning of asset purchase tapering. However, the central bank said "a moderation in the pace of asset purchases may soon be warranted", with Chairman Jerome Powell adding that board members believed tapering could conclude around mid-2022, opening the way for interest rate hikes after that.
“The key story is the dot plot for interest rates. The FOMC is now split 9-9 on whether rates will be raised next year,” said analysts at ING, in a note. “Note too that there is only one FOMC member who doesn’t expect a rate rise by the end of 2023, a massive change from just six months ago.”
The BOE has a tricky task with the U.K. economic recovery stalling but inflation accelerating.
That said, at least one of the nine members on the MPC is likely to vote for an early end to asset purchases.
The country’s consumer price index climbed to 19.25% last month, climbing above the policy rate for the first time in nearly a year, suggesting Turkey’s central bank governor will keep interest rates at high levels despite pressure from the country’s president, Recep Tayyip Erdogan.