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Investing.com - The U.S. dollar edged higher Thursday, bouncing slightly after relatively hawkish comments from Federal Reserve Chairman Jerome Powell, while the euro weakened ahead of the latest European Central Bank meeting.
At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, gained 0.1% to 99.280, but is still over 3% lower this month.
Dollar bounces on hawkish Powell
The dollar has suffered this month as the uncertainty surrounding the Trump administration’s trade policy has undermined confidence in U.S. economic growth and stability.
Powell noted on Wednesday, at the Economic Club of Chicago, that U.S. economic growth appears to be slowing, noting the likely impact of the tariffs imposed on U.S. imports, but added that the Fed is likely to keep its benchmark interest rate steady "to wait for greater clarity before considering any adjustments to our policy stance."
“Markets had leaned towards the Trump-backed narrative that the Fed would come to the rescue with rate cuts despite inflation uncertainty,” said analysts at ING, in a note.
“Powell said he expects higher inflation and a weaker jobs market due to tariffs, but that the Fed is primarily focused on the inflation aspect.”
Traders have been digesting some optimism over trade talks with Japan, while the economic slate includes the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey for April, as well as weekly jobless claims and a string of housing numbers.
“Markets will keep a close eye on any hints that jobless claims have risen in the week after “liberation day”,” said ING.
Euro slips ahead of ECB meeting
In Europe, EUR/USD traded 0.2% lower to 1.1377, with the single currency slipping slightly after gains of near 5% in little more than two weeks.
The European Central Bank is widely expected to announce a 25-basis-point cut later in the session, bringing its deposit rate to 2.25%, as it attempts to support a struggling economy that also faces a hefty hit from U.S. tariffs.
“We expect a 25bp rate cut by the ECB today. Consensus is unanimous, and markets are fully pricing in the move, so the impact on the euro may prove limited,” said ING.
“We don’t expect much in terms of guidance by the ECB,” ING added, “policymakers are as confused as markets on the tariff impact, and they are not able to offer any forward-looking view at this stage.”
GBP/USD edged higher to 1.3244, not far removed from the recently reached six-month high, but capped by a softer-than-expected inflation reading on Wednesday, raising the possibility of a rate cut at the next Bank of England meeting in May.
The BOE held interest rates at 4.5% at its meeting in March, with the voting pattern showing 8-1 in favor of holding rates, while one member voted to cut.
Yen slips after trade negotiations
In Asia, USD/JPY traded 0.6% higher to 142.79, with data showing that Japan’s exports rose for a sixth consecutive month in March, driven by companies rushing shipments ahead of U.S. tariffs.
President Donald Trump announced "big progress" after meeting with a Japanese trade delegation in Washington on Wednesday, kicking off formal tariff negotiations.
USD/CNY traded 0.1% lower to 7.2988, while a Bloomberg report revealed that China is willing to initiate trade discussions with the U.S., but insists on more respect from the White House.