The dollar edged higher in early European trading Thursday, after hawkish comments from the Federal Reserve prompted traders to price in an earlier tightening of monetary policy. The dollar has been in a state of flux over the last couple of months, first rising after the June meeting of the Federal Reserve saw several members bring forward their timetable for interest rate hikes before slipping back after Chairman Jerome Powell stated last week that interest rate increases were still in the distance. The currency took another turn after Fed Vice Chair Richard Clarida, usually seen as something of a dove, said Wednesday that conditions for an interest rate hike could be met in late 2022, setting the stage for a move in early 2023.
Economic data from the Eurozone and the U.S will draw plenty of attention. The main event, however, is the Bank of England monetary policy decision and, more importantly, forward guidance.
The Aussie dollar has rallied a bit during the trading session on Wednesday, but we are still simply shuffling back and forth.