British Pound Hits 28-week High

The US dollar rose against its major trading partners early Thursday ahead of the release of weekly jobless claims, home building data for March and the Philadelphia Federal Reserve's manufacturing reading for April, all at 8:30 am ET.

Weekly natural gas stocks inventories are due at 10:30 am ET, followed by an update to the Atlanta Fed's gross domestic product growth Nowcast estimate for Q1 around midday.

Fed Governor Michael Barr is due to speak at 11:45 am ET.

A quick summary of foreign exchange activity heading into Thursday:

fell to 1.1358 from 1.1390 at the Wednesday US close and 1.1362 at the same time Wednesday morning. The European Central Bank is expected to announce a 25 basis point rate reduction in its post-meeting statement at 8:15 am ET. There are no Eurozone data on Thursday's schedule.

fell to 1.3229 from 1.3240 at the Wednesday US close and 1.3266 at the same time Wednesday morning. There are no UK data on Thursday's schedule. The next Bank of England meeting is scheduled for May 8.

rose to 142.5221 from 142.0755 at the Wednesday US close but was below a level of 142.7491 at the same time Wednesday morning. The Japanese trade surplus narrowed in March according to data released overnight. The next Bank of Japan meeting is scheduled for April 30-May 1.

rose to 1.3890 from 1.3860 at the Wednesday US close but was below a level of 1.3917 at the same time Wednesday morning. The Bank of Canada held interest rates steady on Wednesday, as expected, saying that the monetary policy cannot offset tariff impacts, so the focus needs to be on price stability. The next Bank of Canada meeting is scheduled for June 4. Data on Canadian securities purchases in February are due to be released at 8:30 am ET.

Concerns about weaker U.S. growth resulting from tariffs are largely behind sterling's recent gains against the dollar, Convera strategist George Vessey says in a note. However, this week's softer-than-expected U.K. inflation and labor market data have also weighed on sterling, he says. "This has cemented market expectations of a Bank of England rate cut in May, with two more cuts fully priced in by year-end." Against the euro, however, sterling has recently weakened as the euro benefits from higher liquidity and an ongoing repatriation of assets into the eurozone. Sterling trades flat at $1.3244 after hitting a six-month high of $1.3293 Wednesday, according to FactSet. The euro falls 0.2% to 0.8590 pounds after reaching a 15-month high of 0.8738 on Friday.(renae.dyer@wsj.com)

The US dollar fell against its major trading partners early Wednesday before a busy schedule that begins with retail sales data for March and New York Federal Reserve services data for April at 8:30 am ET.

Industrial production data for March are due to be released at 9:15 am ET, followed by business inventory data for February and the National Association of Home Builders' housing market sentiment reading for April, both at 10:00 am ET.

Weekly petroleum stocks data are due at 10:30 am ET, the Atlanta Fed's gross domestic product growth Nowcast reading is expected to be updated around midday, and Fed Chairman Jerome Powell is scheduled to speak at 1:30 pm ET.

The Treasury's TICS report for February is due at 4:00 pm ET, followed by an appearance by Kansas City Fed President Jeffrey Schmid at 7:00 pm ET.

Earlier Wednesday, the Mortgage Bankers Association said mortgage applications declined due to a sharp rebound in mortgage rates.

A quick summary of foreign exchange activity heading into Wednesday:

rose to 1.1364 from 1.1282 at the Tuesday US close and 1.1335 at the same time Tuesday morning. Eurozone consumer prices rose as expected in March, but the year-over-year rate slowed, while the Eurozone current account surplus narrowed slightly after seasonal adjustment, according to data released earlier Wednesday. The next European Central Bank meeting is scheduled for Thursday, when a 25 basis point rate reduction is expected.

rose to 1.3270 from 1.3226 at the Tuesday US close and 1.3244 at the same time Tuesday morning. UK consumer prices rose less than expected in March, while core prices surprised to the upside, but the year-over-year rates slowed in both cases, according to data released overnight. The next Bank of England meeting is scheduled for May 8.

fell to 142.7330 from 143.2039 at the Tuesday US close and 142.9029 at the same time Tuesday morning. Japanese business conditions improved in April while Japanese machinery orders rebounded more than expected in February. The next Bank of Japan meeting is scheduled for April 30-May 1.

fell to 1.3914 from 1.3966 at the Tuesday US close but was above a level of 1.3865 at the same time Tuesday morning. The Bank of Canada's policy decision is expected to be released at 9:45 am ET followed by a press conference at 10:30 am ET. No change in rates is expected. There are no Canadian economic data scheduled to be released Wednesday.

Eurozone Balance of Payments data is typically not a market mover, but Wednesday's release of the February data could add weight to the story of a rotation out of United States equities and into the eurozone — as some buy-side survey data suggested at the time, said ING.

The data won't break down what has left U.S. equities, but it should tell investors what has come into eurozone equity markets, wrote the bank in a note. For reference, in the 12 months to January, eurozone residents put 134 billion euros into non-eurozone equity markets. This number should, in theory, fall if eurozone residents are repatriating.

Equally, international investors bought 334 billion euros of eurozone equities over the same period. This number should increase if they — especially U.S. asset managers — are increasing their exposure to Europe, helped by the fiscal stimulus news that month, stated ING. If the above turns out to be true, investors should have a little more faith in the rally.

may have already put in a short-term low and be heading back through the 1.1425 area to test 1.1500, pointed out the bank.

Sterling is a little weaker early Wednesday as the United Kingdom services inflation dipped back to 4.7% in March, added ING. At the headline level, the consumer price index has dropped to 2.6% year over year, but the bank believes it could push back to 4% by the end of Q3 on energy prices.

Far more interesting, ING thinks, will be services inflation in April and May. ING believes this could drop still further, even though the Bank of England forecasts a bounce back above 5%. If the bank is right, markets will cement their views of three BoE rate cuts this year — the next one in May.

is unwinding some of last week's spike, but a big bull trend suggests can find some support near 0.85 and a reversal back to 0.86 is likely over the coming months, noted ING. is dominated by the soft US dollar story and has last year's highs of 1.3430 in its sights.

Tuesday's hearing by the future Hungary central bank (MNB) Governor Zoltan Kurali helped the forint (HUF) to make some gains and stave off further depreciation above 410 . Still, the bank believes HUF is the most globally driven currency within the Central and Eastern European (CEE) region and further recovery in European equity markets pushed lower as well.

At the same time, this could help on Wednesday again, unless ING sees a change in sentiment, and could test 407.

Poland's zloty (PLN) and the Czech Republic's Koruna (CZK) rates market saw some return of payers on Tuesday, which helped widen the rate differential a bit, according to the bank. While in the CZK market, ING believes this is the way to go for the days ahead, given the hawkish Czech central bank (CNB), in the PLN market, on the other hand, the start of the cutting cycle at Poland's central bank (NBP) will keep rates tight against the core market.

As a consequence, ING continues to see moving lower with 5.850 broken on Tuesday and 5.800 on the table for the next two weeks.

The Bank of England should maintain a cautious approach to interest rate cuts after Wednesday's U.K. inflation data but sterling still looks set to underperform the euro, MUFG Bank's Derek Halpenny says in a note. Inflation eased more than expected to 2.6% in March. However inflation could reaccelerate in the second quarter given the rise in employers' national insurance tax in April and increase in the energy price cap, he says. There's also uncertainty over the impact of U.S. tariffs on inflation. Sterling should continue to underperform the euro as the dollar weakens, although quicker-than-expected progress on a U.S.-U.K. trade deal would reduce that underperformance, he says. The euro rises 0.5% to 0.8572 pounds. (renae.dyer@wsj.com)

The pound rose for a seventh straight day to $1.327, boosted by a weaker dollar despite softer UK inflation data, marking its longest winning streak since July.

Inflation cooled more than expected, with the headline CPI falling to 2.6% year-on-year and services inflation dipping to 4.7%, easing pressure on the Bank of England.

This has led traders to slightly increase bets on rate cuts, now pricing in 86 basis points of easing by year-end.

Markets now see a better-than-even chance of a fourth rate cut in December, as slower price growth may give the BoE room to support the economy amid global trade uncertainty and rising household costs.