The dollar was weaker on Thursday afternoon as expectations for the trajectory of US interest rates were reassessed following comments from a senior Federal Reserve official.
Against the Swiss franc, the dollar was priced at CHF0.9084 on Thursday afternoon in London, down from CHF0.9107 at the same time on Wednesday.
Fed governor Philip Jefferson told a conference in Washington that "skipping a rate hike at a coming meeting would allow the [Federal Open Market] Committee to see more data before making decisions about the extent of additional policy firming."
Jefferson added that "a decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle," suggesting he did not think the Fed was necessarily done with interest-rate hikes going forward.
Following his comments, markets now see a 72% chance of the Federal Reserve holding interest rates steady at its next meeting. Last week, markets only saw a 48% chance of such an outcome.
"The market was gearing up for a June Fed hike and officials and this helped lift the greenback. However, the Fed Governor Jefferson, nominated to be the next vice-chair, pushed back against it," said Marc Chandler at Bannockburn.
Versus the Japanese yen, the dollar was trading at JPY139.13 Thursday, lower against JPY139.80 on Wednesday.
Also weighing the dollar on Thursday was the news that the US House has approved a debt ceiling and budget cuts package as the positive news gave risk assets a boost.
Versus the Australian dollar, the US currency was priced at AUD1.5313, down from AUD1.5445. Against the Canadian loonie, the dollar traded at CAD1.3535, lower against CAD1.3638.
President Joe Biden and House Speaker Kevin McCarthy assembled a bipartisan coalition of centrist Democrats and Republicans against fierce conservative blowback and progressive dissent. The hard-fought deal pleased few, but politicians assessed it was better than the alternative — a devastating economic upheaval if Congress failed to act.
The pound was quoted at USD1.2483 on Thursday afternoon, up sharply from USD1.2363 on Wednesday afternoon.
Against the euro, sterling was trading at EUR1.1655, up from EUR1.1572.
European Central Bank policy members early last month argued that higher interest rates are warranted by persistent inflation and that a pause in its tightening cycle would be unwise, according to the minutes of the ECB Governing Council meeting.
The central bank held its most recent monetary policy meeting of the Governing Council in Frankfurt on May 3 and 4. At that meeting, the ECB raised eurozone interest rates by 25 basis points.
The ECB is set to unveil its next decision on June 15, with the market expecting another hike of 25 basis points.
On Thursday, ECB President Christine Lagarde said eurozone inflation was still "too high" and that interest rates will continue to hike but at a more gradual pace.
"We are getting a bit closer to our cruising altitude, not there yet, and that means that we need to continue climbing, but not as rapidly," Lagarde told a banking conference in Hanover.
Inflation in the eurozone cooled faster than expected in May, according to an official estimate on Thursday.
According to a preliminary estimate from Eurostat, the harmonised index of consumer prices rose by 6.1% in May from a year before, cooling from a 7.0% annual rise in April.
Market consensus, according to FXStreet, had been expected a reading of 6.3%. But inflation remains well above the ECB's 2% target.
For Jack Allen-Reynold, deputy chief eurozone economist at Capital Economics, the gradual declines in the eurozone inflation will be unlikely to stop the ECB from raising interest rates in June "and probably July."
The euro was changing hands at USD1.0711 on Thursday afternoon London time, higher against USD1.0681 at the same time on Wednesday.