Greenback falls; pound steadies before BOE meeting

London

THE US dollar fell from a two-week high on Thursday as global market risk appetite improved, while traders focused on a Bank of England (BOE) meeting and economic data that may provide clues on when the US Federal Reserve might dial back monetary stimulus.

The US dollar has rebounded from a one-month low over the past week, swung by US economic data that has largely supported the case for a rapid recovery from the pandemic. But it slipped on Thursday, and by 1019 GMT was down 0.3 per cent on the day at 91.03 against a basket of currencies.

On May 5, Federal Reserve speakers downplayed the risks of higher inflation.

Immediate market attention was focused on the BOE meeting at 1100 GMT. The central bank is expected to say that Britain's economy is heading for a much stronger recovery this year than it previously expected, and it might start to slow its pandemic emergency support.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

At 1024 GMT, the pound was steady against the weaker US dollar, at US$1.3916. The euro was up 0.4 per cent versus the US dollar at US$1.2049, and up 0.3 per cent against the pound, at 86.57 pence per euro.

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

It was up 0.1 per cent versus the US dollar at 0.77515 at 1028 GMT, having hit as low as 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1 per cent on the day. "The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event," wrote ING strategists in a note to clients.

Strong domestic demand for consumer goods propelled a bigger than expected jump in German industrial orders in March, suggesting that manufacturers in Europe's largest economy will support a recovery in the second quarter.

The Canadian dollar hit a three-year high, helped by oil price gains and the Bank of Canada's recent shift to more hawkish guidance. REUTERS