Key Moments
- The Dollar Index rose 0.1% to 98.127, extending gains from the prior session, though it remains more than 9% lower this year.
- GBP/USD slipped to 1.3359 as markets anticipated a Bank of England rate cut from 4.0% to 3.75% after a sharp inflation slowdown.
- USD/JPY climbed to 155.82 as the yen weakened ahead of a Bank of Japan meeting expected to deliver a rate hike.
Dollar Edges Higher but Faces Steep Yearly Loss
The U.S. dollar edged higher on Thursday, consolidating recent gains. Meanwhile, investors focused on European central bank meetings and upcoming U.S. inflation data.
At 04:10 ET (09:10 GMT), the Dollar Index — which tracks the greenback against six major currencies — rose 0.1% to 98.127. This followed a 0.2% increase in the prior session. However, the index remains down more than 9% year to date and is on track for its largest annual decline since 2017.
U.S. Labor and Inflation Data Back in Focus
Traders faced a busy data calendar on Thursday as they reassessed the outlook for U.S. interest rates.
Data released on Tuesday showed nonfarm payrolls increased by 64,000 in November. At the same time, the unemployment rate climbed to 4.6%, its highest level since 2021.
Later in the session, weekly jobless claims and the U.S. Consumer Price Index were due. Both indicators remain critical inputs for the Federal Reserve’s policy path.
Unless weekly jobless claims spike today, we doubt U.S. data will move the dollar much
, ING analysts said.
This includes the delayed CPI reading, expected at 3.1% year-on-year. Even so, it looks unlikely to trigger a major reassessment of the Fed’s trajectory.
Sterling Softens Ahead of Bank of England Decision
In European trading, GBP/USD slipped 0.1% to 1.3359 as investors positioned for the Bank of England’s policy announcement.
The U.K. central bank is widely expected to cut its benchmark rate to 3.75% from 4.0%. This expectation reflects weaker inflation and signs of slowing economic activity.
Data published on Wednesday showed a sharp drop in U.K. inflation. As a result, expectations for near-term easing strengthened. Still, at 3.2%, U.K. CPI remains the highest among G7 economies.
Market pricing suggests investors are fully factoring in only one additional BoE rate cut in 2026, likely by April. However, the probability of a second move increased after November’s inflation decline.
This sounds moderately negative for sterling
, ING said.
However, speculative positioning remains heavily underweight the currency.
Euro Dips as ECB Seen on Hold
EUR/USD traded 0.1% lower at 1.1730 as markets awaited the European Central Bank’s decision. The ECB is expected to keep rates unchanged while upgrading growth projections.
After last week’s hawkish turn, investors will watch whether forecasts and rhetoric shift today
, ING added.
Other Nordic central banks were also in focus. Policymakers in Sweden and Norway were expected to keep policy settings unchanged.
After September’s cut to 1.75%, the Riksbank is likely to stay on hold for a prolonged period
, ING said.
Meanwhile, the Norges Bank appears in no rush to cut its 4.00% deposit rate.
🚨 BREAKING:
🇺🇸 FED RELEASES CRUCIAL CPI INFLATION DATA AT 8:30 AM ET
CORE INFLATION EXPECTED: 3.0%
EXPECT HIGH VOLATILITY!! pic.twitter.com/mBuBpFdzfB
— Degen Mike (@Degenmike06) December 18, 2025
Major FX Levels Overview
| Currency Pair / Index | Latest Level | Move | Context |
|---|---|---|---|
| Dollar Index | 98.127 | +0.1% | Extends gains but remains down over 9% YTD |
| GBP/USD | 1.3359 | -0.1% | Weak ahead of expected BoE rate cut |
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