Dollar bounces, sterling tumbles on dovish BoE



* Graphic: World FX rates Link

By Karen Brettell

NEW YORK, May 5 (Reuters) - The dollar rebounded on Thursday but held below 20-year highs reached last week, a day after the Federal Reserve affirmed that it would take aggressive steps to combat soaring inflation but played down the prospect of even larger rate hikes.

The greenback dropped sharply on Wednesday after Fed Chair Jerome Powell told reporters that policymakers were not actively considering 75-basis-point moves in the future. It came after the U.S. central bank hiked rates by 50 basis points, as was widely expected.

But it regained ground on Thursday with the euro dented by weak German data showing that industrial orders in March suffered their biggest monthly drop since last October.

The greenback was also boosted by safe haven buying as stocks dropped, dragged down by megacap growth stocks.

Wednesday’s Fed meeting was “the first time in a long time that Powell and the Fed have not become incrementally more hawkish,” said Erik Nelson, a macro strategist at Wells Fargo in New York.

“I think that’s a game changer in terms of the one-way upward move in the dollar and rates and I do think we’ll have continued pullback in the dollar here over the next few days,” Nelson said, though he added that “what really happens now is going to hinge on the data.”

Consumer price inflation data next Wednesday will be watched for any signs that price pressures that have been rising at the fastest pace in 40 years are easing.

This week's major U.S. economic release will be the government's jobs report for April released on Friday.

The dollar index =USD was last at 103.43, up 0.87% on the day. It reached 103.93 last Thursday, the highest since December 2002.

The euro EUR=EBS fell to $1.0551, down 0.67%, after dropping to $1.0470 last Thursday, the lowest since January 2017.

The single currency has fallen as the region struggles with weaker growth and energy disruptions due to sanctions imposed on Russia after its invasion of Ukraine.

The European Central Bank should not raise interest rates in July, even though the inflation outlook suggests it can gradually reduce support for the economy, ECB board member Fabio Panetta told Italian newspaper La Stampa.

Money markets expect an ECB interest rate hike as early as July ECBWATCH .

The pound tumbled after the Bank of England raised interest rates to their highest since 2009 but warned that the economy was at risk of recession.

Sterling GBP=D3 fell 2.10% to $1.2371, the lowest since July 2020.

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Currency bid prices at 10:25AM (1425 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

103.4300

102.5500

+0.87%

8.119%

+103.5300 +102.3400 Euro/Dollar

EUR=EBS

$1.0551

$1.0622

-0.67%

-7.20%

+$1.0642

+$1.0536 Dollar/Yen

JPY=EBS

130.1550

129.1200

+0.79%

+13.05%

+130.3300 +128.7550 Euro/Yen

EURJPY=

137.31

137.09

+0.16%

+5.36%

+137.5700 +136.8400 Dollar/Swiss

CHF=EBS

0.9845

0.9724

+1.26%

+7.95%

+0.9853

+0.9709 Sterling/Dollar GBP=D3

$1.2371

$1.2636

-2.10%

-8.53%

+$1.2632

+$1.2362 Dollar/Canadian CAD=D3

1.2804

1.2737

+0.55%

+1.29%

+1.2809

+1.2713 Aussie/Dollar

AUD=D3

$0.7135

$0.7256

-1.65%

-1.84%

+$0.7266

+$0.7133 Euro/Swiss

EURCHF=

1.0385

1.0323

+0.60%

+0.15%

+1.0389

+1.0318 Euro/Sterling

EURGBP=

0.8526

0.8403

+1.46%

+1.50%

+0.8545

+0.8407 NZ

NZD=D3

$0.6439

$0.6544

-1.58%

-5.91%

+$0.6568

+$0.6438 Dollar/Dollar

Dollar/Norway

NOK=D3

9.4300

9.2410

+2.08%

+7.08%

+9.4330

+9.2090 Euro/Norway

EURNOK=

9.9540

9.8297

+1.26%

-0.61%

+9.9545

+9.7743 Dollar/Sweden

SEK=

9.8834

9.7386

+0.74%

+9.60%

+9.8945

+9.7205 Euro/Sweden

EURSEK=

10.4285

10.3516

+0.74%

+1.90%

+10.4297

+10.3298
Reporting by Karen Brettell; Editing by Andrea Ricci

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