Investing.com - The pound rebounded slightly on Wednesday after falling to a two-year low, while the U.S. dollar was flat ahead of an expected Federal Reserve rate cut.
A reduction of at least a quarter-point at 2:00 PM ET (18:00 GMT) from the Fed is priced in, with investors focused on Chairman Jerome Powell’s press conference a half-hour later for clues on further easing in the light of slowing global growth, notably caused by fallout from the trade conflict with China.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was flat at 97.838 by 10:18 AM ET (14:18 GMT).
The dollar was unmoved against the Japanese yen, with USD/JPY flat at 108.54.The Bank of Japan left rates steady on Tuesday but could ease monetary policy if global developments drag on the economy.
Sterling recovered, with GBP/USD up 0.5% to 1.2211, in a move that had no obvious triggers but which followed two days of sharp losses that made it ripe for a technical correction.
The pound had fallen to a two-year low of 1.2158 after newly elected Prime Minister Boris Johnson and his new cabinet of die-hard Brexiteers stepped up their rhetoric and their preparations for taking the U.K. out of the European Union by October 31, a timeframe that leaves little or no time to renegotiate a transitional deal to guarantee continued smooth trade between the two.
The currency is expected by many to fall further as Johnson’s plan to leave the EU is widely seen as likely to hurt the U.K. economy. While the Bank of England is expected to keep interest rates steady at its meeting on Thursday, the implied odds of a rate cut later have risen in recent days.
Elsewhere, the euro was down 0.2% to $1.1136 after data showed that the euro zone's gross domestic product grew only 0.2% in the second quarter. The third quarter has also started weakly, with the core consumer price index falling to 0.9% in July, barely half the European Central Bank's target for headline inflation.
USD/CAD lost 0.2% to 1.3120.