Investing.com - The U.S. dollar rose Friday, continuing its recent rebound after the Federal Reserve saw no immediate need to cut interest rates.
At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 103.710, after gaining around 0.4% on Thursday, bouncing further away from the five-month low touched earlier this week.
Dollar recovers ground
The Federal Reserve held its key rates unchanged earlier this week, as widely expected, and projected slower economic growth and higher inflation as the year progresses.
However, the U.S. central bank also indicated no particular rush to cut interest rates, while jobless claims data released on Thursday suggested resilience in the labor market, which is one of the Fed’s main considerations in deciding monetary policy.
“The U.S. data calendar is empty today. A day without key data may offer better opportunities for the greenback to keep recovering ground,” said analysts at ING, in a note.
“The Federal Reserve’s blackout period is also officially over, and the cautious tone struck by the FOMC and Chair Jerome Powell this week likely leaves decent room for post-meeting tweaks in communication. Those should mostly come after new data has been released.”
Sterling slips post BOE
In Europe, GBP/USD fell 0.3% to 1.2926, after the Bank of England kept its key interest rate unchanged at Thursday’s policy-setting meeting.
“There were two noteworthy aspects of the meeting,” ING said, “firstly, Catherine Mann has rapidly abandoned the dovish camp, leaving only one member voting against a hold, and secondly, we saw some reference to the fact that should data show greater job market instability, the BoE can draw disinflation-related conclusions and cut rates faster.”
EUR/USD traded 0.1% lower at 1.0836, after European Central Bank President Christine Lagarde spelled out the cost of a trade war with the United States for the eurozone’s economy.
Lagarde said a 25% tariff imposed by the U.S. on imports from Europe would lower eurozone growth by about 0.3 percentage points in the first year, while retaliatory measures could increase this to about half a percentage point.
“The next major support for EUR/USD is probably the 1.0725 200-day moving average, which is now the key benchmark for a return to a bullish mood on the greenback,” ING added.
Yen weakens
In Asia, USD/JPY traded 0.4% to 149.39, with the Japanese yen weakening even as stronger-than-expected consumer inflation data for February kept traders focused on more interest rate hikes by the Bank of Japan.
Underlying consumer price index inflation rose further past the BOJ’s 2% annual target in February, tying into the central bank’s forecast of stronger wage growth driving up personal spending and inflation this year.
The BOJ is now widely expected to hike rates in May.
USD/CNY edged higher to 7.2494, amid continued focus on more stimulus measures from Beijing.