By Rae Wee and Alun John

SINGAPORE/LONDON (Reuters) – The euro sat at a 10-month excessive in opposition to the greenback on Thursday, forward of a European Central Financial institution assembly at which markets count on a half-percentage level price enhance, a day after the U.S. Federal Reserve slowed the tempo of its rises to 25 foundation factors.

The Fed additionally stated it had turned a nook within the struggle in opposition to inflation, its first express acknowledgment that worth will increase are slowing, underpinning market expectations that the tip of the central financial institution’s rate-rise marketing campaign is close to and cuts may observe.

The greenback’s most dramatic in a single day dive got here after Fed Chair Jerome Powell informed a put up assembly information convention that “the disinflationary course of has began”, though he additionally signalled that rates of interest would proceed rising and that cuts weren’t within the offing.

“It was very a lot a kind of reduction … that there was nothing there to essentially critically problem the market’s prevailing view,” stated Ray Attrill, head of FX technique at Nationwide Australia Financial institution (OTC:) (NAB).

“(Powell) stated that charges are going to must be restrictive for a while, however that does not dissuade the market from saying a while is likely to be six months, slightly than two years.”

The Financial institution of England additionally meets on Thursday, with its price choice due at 1200 GMT earlier than the ECB’s at 1315 GMT. Markets additionally count on a half-point enhance from the British central financial institution.

Sterling, which rose 0.47% on Wednesday, held at $1.236, and the greenback slid in opposition to the Japanese yen, dropping to as little as 128.07, its lowest in two weeks.

The euro hit $1.1034 in Asian buying and selling on Thursday, its highest since April 4, having jumped 1.2% on Wednesday. It was final at $1.100, broadly flat on the day, as the main focus turned to the ECB assembly.

“A 50bp hike is extensively anticipated as is a hawkish message that can help market pricing of an extra 75-100bp of tightening into the summer time,” stated Chris Turner world head of markets at ING in a observe.

“A pointy narrowing in price differentials stands to develop into an even bigger driver of this 12 months and may carry it to the $1.15 space within the second quarter.

Turner stated the derivatives market exhibits the smallest premium in greenback charges over euro equivalents since late 2021.

Additionally among the many sharper Wednesday movers had been the Australian greenback, which gained 1.2% on the day and hit a brand new eight-month excessive of $0.7158 in early Asia commerce Thursday, and the Swiss franc which firmed to its strongest since late 2021 on Thursday.

Towards a basket of currencies, the fell over 1% to a contemporary nine-month low of 100.80 on Wednesday, and traded simply above that on Thursday.

Friday’s U.S. nonfarm payrolls report would be the subsequent take a look at of the Fed’s struggle in opposition to inflation, although official statistics on Wednesday confirmed that job openings had unexpectedly risen in December, pointing to a still-tight labour market.