The US Dollar held steady early Friday, while the Japanese Yen remained firm against its peers after the Bank of Japan raised its policy rate by 25 basis points to 0.75%. Markets now turn their attention to mid-tier economic data from the UK, Germany and the United States ahead of the weekend.
The Bank of England lowered the bank rate by 25 bps to 3.75% at its December meeting, with the decision narrowly passing by a 5–4 vote, as Governor Andrew Bailey cast the deciding vote in favor of a cut. In its statement, the BoE reiterated that interest rates are still on a gradual downward trajectory, while warning that future easing decisions could become more finely balanced. GBP/USD initially climbed toward 1.3450 following the announcement but reversed course during the US session, ending Thursday marginally higher. The pair remains range-bound early Friday, trading below 1.3400, with November Retail Sales data due later from the UK Office for National Statistics.
On the US front, the Bureau of Labor Statistics reported that headline CPI inflation eased to 2.7% year-on-year in November, while core CPI slowed to 2.6%, both undershooting market expectations. The softer inflation data briefly pressured the dollar, but a cautious risk environment helped limit losses, allowing the USD Index to post modest daily gains. Early Friday, the index is holding near the 98.50 level. Additional data showed Initial Jobless Claims falling to 224,000 in the week ending December 15, down from 237,000. Markets will also digest Existing Home Sales for November and the final reading of the University of Michigan Consumer Sentiment Index later in the day.
The European Central Bank left interest rates unchanged at its final policy meeting of the year, in line with expectations. ECB President Christine Lagarde emphasized the resilience of the eurozone economy but noted that uncertainty prevents the bank from offering forward guidance. While reiterating that the ECB does not target exchange rates, Lagarde said policymakers are closely monitoring the euro’s strength. EUR/USD ended Thursday lower after a volatile session but stabilized above 1.1700 early Friday. Germany’s consumer sentiment and producer price data are due later.
Meanwhile, the Bank of Japan raised its short-term policy rate by 25 bps to 0.75% from 0.50% following its two-day meeting. Policymakers reiterated that further rate increases would be warranted if economic and price developments align with forecasts. The BoJ also stressed the need to remain vigilant to risks, including movements in foreign exchange markets. USD/JPY edged higher toward 156.00 in early European trading, up about 0.3% on the day.
