Dollar drops on speculation Trump will announce Powell as new Fed chair
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The pound moved higher early on Thursday, ahead of the Bank of England decision, when the bank is widely predicted to raise interest rates for the first time in a decade.
Sterling traded at $1.3271, up from $1.3246 late Wednesday in New York. Against the euro, the U.K. currency bought EUR1.1403, up from EUR1.1399 on Wednesday.
The strength in the pound comes as investors wait for the BOE to deliver its so-called Super Thursday clutch of releases: its rate decision, meeting minutes and Quarterly Inflation Report. The central bank is widely expected to raise its benchmark interest rate to 0.5% from the current record low of 0.25%.
Read:5 things investors need to know as the Bank of England prepares for historic rate hike (http://www.marketwatch.com/story/5-things-investors-need-to-know-as-the-bank-of-england-prepares-for-historic-rate-hike-2017-10-31)
Such a move would essentially undo the "emergency" rate cut made in August last year. That's when the BOE slashed rates by 25 basis points in response to the severe market and political turmoil that followed the U.K.'s vote to leave the European Union.
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The big question is whether the anticipated rate rise on Thursday is a one-and-done deal or the beginning of a tightening cycle as currently seen in the U.S.
"In our opinion, the case for a hike now is far from compelling. Indeed, the hike could well prove to be an error. And we do not expect further tightening to come for as long as Brexit uncertainty persists," said economists at Daiwa Capital Markets in a note.
The decision is out at noon London time, or 8 a.m. Eastern Time, followed by a press conference with BOE Gov. Mark Carney at 12:30 p.m. London time.
Read:Here's how a Bank of England rate hike could 'kill' the British pound (http://www.marketwatch.com/story/heres-how-a-bank-of-england-rate-hike-could-kill-the-british-pound-2017-11-01)
Meanwhile, the dollar declined against most other major currencies after reports Donald Trump has picked current Federal Reserve Governor Jerome Powell as the next chairman (http://www.marketwatch.com/story/white-house-has-informed-powell-he-will-be-next-fed-chief-report-2017-11-01) of the U.S. central bank. That means the more hawkish John Taylor would be out of the race.
The ICE Dollar Index fell 0.2% to 94.659 on Thursday, breaking a two-day winning streak.
See also:How a hawkish Czech central bank could send the koruna to new highs (http://www.marketwatch.com/story/how-a-hawkish-czech-central-bank-could-send-the-koruna-to-new-highs-2017-11-01)
(END) Dow Jones Newswires
November 02, 2017 04:39 ET (08:39 GMT)