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The US dollar retreated on Thursday ahead of the nation’s delayed tax bill announcement and amid expectations that President Donald Trump will nominate Federal Reserve Governor Jerome Powell as the new Fed chair, undoing its gains after the central bank’s decision to keep rates unchanged.

The dollar index, which measures the greenback’s strength against a basket of major currencies, dropped 0.1 percent to $94.58.

Strategist Nizam Idris stated that the dollar’s weakness today stemmed from the tax bill’s one-day delayed announcement, adding that Trump might have to go back and make some compromise about the phasing in lower corporate tax rates.

The greenback has been strengthened since September on tax cut hopes, but it could be undone if the bill showed some kind of discrepancy among lawmakers.     

Meanwhile, the currency withdraws from a 3-1/2-month high against the yen, losing 0.1 percent to 114.04. It gained about 0.5 percent overnight, hitting its highest level of 114.45 since July 11, after Fed held its rates steady at 1 to 1.25 percent.

The bank noted strong economic growth as well as further decline in the labor market at the end of its two-day policy meeting. Analysts believed that this statement suggested that a rate hike next month is much likely to happen.

Senior strategist Shin Kadota said that the dollar found support from Fed’s announcement, but the effect was limited as both the decision and its statement was not really much of a surprise.

Kadota added that Trump’s plans of appointing Powell, who seems to be less hawkish than the other candidates, as the bank’s next chair was also causing the greenback’s shortcomings. The White House is expected to make the announcement on Thursday.

The dollar declined by 0.1 percent to 1.28 against its Canadian counterpart, while it slipped by 0.3 percent to 1.00 against the Swiss franc.

The euro on the other hand, was up by 0.1 percent to 1.16 against the greenback. The Australian dollar gained 0.3 percent to 0.77, whereas the kiwi rose 0.3 percent to 0.69. 

Pound Rises Ahead of BoE Rate Decision

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The British pound remained the strongest one for the week as markets anticipate the Bank of England’s (BoE) policy rate decision later in the day.

The sterling climbed 0.1 percent to 1.32 against the US dollar on Thursday, maintaining its gains for the week, despite its pullback on Wednesday.

The currency remained upbeat on high hopes of a rate hike by BoE at today’s meeting, after positive data in Britain’s manufacturing sector supported the possibility for an increase.

IHS Markit’s Director said that continued robust health of manufacturing as well as growing price pressures will help reinforce expectations of the bank raising its interest rates for the first time in a decade. Economists estimated that BoE will hike base rates to 0.5 percent.

Former BoE deputy governor Rachel Lomax stated that lifting its rates from a quarter percent to half a percent seems to be pretty high.

Hiking its rates to 0.5 percent may not upset the economy, but further increases might not be such a good idea as well.

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