Daily Morning Report 14.05.2018

The dollar edged lower against a basket of the other major currencies on today after its recent rally to multi-month highs stalled amid diminished expectations for an aggressive pace of monetary tightening by the Federal Reserve this year.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.23% at 92.23 by 07:42 GMT.

The index hit four-and-a-half month highs of 93.26 on Wednesday before retreating, to end the week almost unchanged, snapping three straight weeks of gains.

The rally in the dollar lost momentum after tame U.S. inflation data tempered expectations for a faster pace of rate hikes by the Fed.

The Fed raised rates in March and projected two more rate hikes this year, although many investors had seen three hikes as possible.

Earlier today, Cleveland Fed head Loretta Mester reiterated her support for gradual rate hikes given that inflation has not yet reached the U.S. central bank’s 2% target in a sustained way.

The euro moved higher, with EURUSD rising 0.26% to 1.1977 by 08:05 GMT, having recovered from last week’s lows of 1.1821, a level not seen since late December.

The dollar edged higher against the yen, with USDJPY inching up 0.12% to 109.48.

The pound gained ground, with GBPUSD climbing to 1.3585 by 08:07 GMT.

Sterling hit four-month lows against the dollar on Thursday after the Bank of England left interest rates on hold as expected, but its cut growth and inflation forecasts for this year and next.

Elsewhere, the Australian dollar was higher, with AUDUSD up 0.16% to 0.7551, extending its recovery from the eleven-month lows of 0.7411 reached last week.

The New Zealand dollar remained on the back foot, with NZDUSD slipping 0.19% to 0.6956, holding above the five-month low of 0.6901 reached on Thursday after the country’s central bank left rates on hold and said the next move in rates could just as easily be a cut as a hike.