The dollar maintained its strength against major currencies as market participants prepared for upcoming central bank decisions in Britain, Europe, and Japan. Sterling continued to trade lower following an unexpected decline in UK inflation, reinforcing the argument for a potential rate cut by the Bank of England. The yen reduced its losses from the prior session as the Bank of Japan commences a two-day meeting, anticipated to culminate in an increase in policy rates to a level not seen in three decades. The dollar responded calmly to remarks from U.S. President Donald Trump regarding the next Federal Reserve chair’s belief in significantly lower interest rates.

“There will be a generally stronger dollar,” stated Ray Attrill. The unexpectedly low UK inflation report from the previous session “has sealed the deal for a BOE rate cut later today.” The dollar index, which assesses the greenback relative to a range of currencies such as the yen and the euro, remained relatively stable at 98.416 following a 0.2% increase in the previous session. The yen experienced a minor depreciation, settling at 155.76 following a 0.6% decline on Wednesday. The euro remained relatively stable at $1.1739, and sterling held steady at $1.3367 following a 0.4% decrease the day before.

Interest rate futures indicate an almost certain probability of a quarter-point rate cut from the BoE on Thursday, prompted by the unexpectedly low inflation figures for November in the UK. The European Central Bank is anticipated to maintain current rates and indicate a limited willingness for reductions in the short term during its meeting on Thursday. Over in Asia, the BOJ is all but certain to raise short-term interest rates to 0.75% from 0.5% at a two-day policy meeting ending on Friday, as high food costs keep inflation above the central bank’s 2% target. On Wednesday, Prime Minister Sanae Takaichi emphasized the necessity for Japan to engage in proactive spending aimed at enhancing growth and increasing tax revenues, reaffirming her administration’s commitment to strengthening a vulnerable economy. According to Vincent Chung the BOJ may implement two rate increases in 2026 to address ongoing, real negative interest rates. “There are some expectations that the BOJ would not adopt a hawkish stance in its forward guidance, which may result in some short-term weakness in the yen; however, we believe this effect will be temporary,” Chung stated. In the U.S., there exists ambiguity regarding the timeline for potential rate cuts by the Fed, alongside concerns about the central bank’s ability to uphold its independence as Trump speculates on possible successors to Fed Chair Jerome Powell. On Wednesday, Fed Governor Christopher Waller indicated that the U.S. central bank retains the capacity to lower interest rates in light of increasing job market vulnerabilities.

In contrast, Atlanta Federal Reserve President Raphael Bostic stated on Tuesday that he believed the Fed’s decision to cut rates last week was not justified. Trump, expressing his desire to be involved in Federal Reserve decisions, stated during a broadcast from the White House that he would soon reveal his choice to succeed Powell at the conclusion of his term in May. “I will soon reveal our next chairman of the Federal Reserve, an individual who is a strong advocate for significantly lower interest rates, which will lead to even further reductions in mortgage payments,” Trump stated. All of the known finalists – White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and Waller – support a stance for interest rates to be lower than the current levels, although none has suggested that policy should align with the lower rates proposed by Trump. The Australian dollar traded at $0.6597, reflecting a decline of 0.1% in early market activity. The kiwi was priced at $0.5760, reflecting a decline of 0.3%, while largely disregarding the data indicating that New Zealand’s economy experienced growth in the third quarter. In the realm of cryptocurrencies, bitcoin experienced an increase of 0.5%, reaching a value of $87,375.39, while ether saw a rise of 0.3%, now priced at $2,826.20.