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Dollar holds firm but is losing ground against JPY

AHEAD of the release of weekly initial unemployment claims and natural gas inventories, the US dollar was little changed against its major trading partners early Thursday, with the exception of a little pullback against the Japanese yen.

As a result the Federal Reserve is largely expected to raise the federal funds rate by 50 basis points at its next meeting on June 14-15, with a second 50-basis-point hike possible on July 26-27.

Meanwhile, Federal Reserve officials are keeping a low profile this week in preparation for the June meeting, so no public appearances are planned. The consumer price index for May, which is set to be released on Friday, is unlikely to have any bearing on the FOMC’s decision next week.

A quick review of Wednesday’s foreign exchange activities shows that the EUR-USD gained marginally to 1.072 from 1.0717 at the US closing on Wednesday and 1.0726 at the same time Wednesday morning.

Also the European Central Bank meeting is the main event for Thursday. Instead of changing rates, the ECB is anticipated to prepare markets for a rate hike at its July 22 meeting and disclose adjustments to its bond-buying program.

Nonfarm payrolls in France grew at a slower rate in the first quarter than in the previous quarter, according to figures released earlier Thursday. The GBP/USD exchange rate was almost constant at 1.2536, down from 1.2538 at the US closing on Wednesday and from 1.2547 at the same point Wednesday morning.

On Thursday, no UK data is expected to be released. While on June 16, the Bank of England will meet again, and another rate hike is predicted.

After advancing higher overnight, the USD-CAD dipped slightly to 1.2556 from 1.2558 at Wednesday’s US close, but it stayed above the 1.2542 mark at the same time Wednesday morning.

There are no Canadian data releases scheduled for Thursday, so the attention will be on the May employment report on Friday. Following a 50-basis-point rate hike last week, the Bank of Canada will meet on July 13 to discuss additional monetary policy tightening.

The USD-JPY exchange rate decreased to 133.3507 from 134.2575 at the US end on Wednesday and 133.8866 at the same time on Wednesday morning. On Thursday’s schedule, there is no Japanese data.

At its meeting on June 16-17, the Bank of Japan is expected to keep its ultra-low interest rate regime in place, after the Fed’s predicted 50-basis-point rate hike.

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