Investing.com – The US dollar strengthened on Thursday and sterling lost ground ahead of the Bank of England’s latest policy meeting.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading 0.2% higher at 105.122, approaching last week’s monthly high of 105. 80.

The dollar is strengthening after the holidays

The US currency strengthened on Thursday as traders returned from their holidays in the United States.

The U.S. macroeconomic data set will feature numbers and data later in the session as investors look for further clues as to when the Federal Reserve will start cutting interest rates.

Several Fed officials expressed caution about expecting interest rate cuts too early, looking for further evidence that inflation has been subdued before the central bank agrees to ease monetary policy.

“It looks like confidence in data just isn’t enough to trigger a dovish turn in communications, but the forward-looking nature of markets means data remains more important than Fed speakers, with 50 basis point cuts predicted by year-end reflect cautious optimism about disinflation,” ING analysts said in a note.

Sterling loses ahead of the BOE meeting

fell 0.1% to 1.2699 in anticipation of the Bank of England’s latest decision later in the session.

The central bank is widely expected to leave interest rates unchanged, even after data released earlier this week showed the annual rate fell to 2.0%, in line with its medium-term target.

This marked a edged decline from a 41-year high of 11.1% reached in October 2022, but wage growth and accompanying price pressures remain a concern for the central bank.

fell 0.2% to 1.0718, with political unrest in the region continuing to weigh on the common currency.

The European Commission said on Wednesday that France and six other countries should be punished for running budget deficits above EU limits, with deadlines set in November to reduce the gaps.

This came after French President Emmanuel Macron called early elections following his party’s impoverished performance in the European Parliament elections, throwing the EU’s second-largest economy into political turmoil.

saved 0.7% to 0.8901 after a 25 basis point cut in the key interest rate, continuing the cycle of rate cuts after the March cut.

This decision was a measured one, given the recent rebound in economic growth and bucking the trend of slightly dwindling inflation in Switzerland.

Yen remains frail

In Asia, shares rose 0.2% to 158.44, hitting a one-month high, with the yen continuing to show weakness after the Bank of Japan adopted a relatively dovish stance on bond purchases at its latest policy meeting.

it was up 0.1% at 7.2604, with the Chinese yuan remaining under pressure amid doubts over the strength of the country’s economic recovery.